Friday, March 1, 2013

1/3/2013: Eurocoin February 2013 - 17 months-long recession?

February eurocoin leading growth indicator for the euro area, published by the Banca d'Italia and CEPR came in at another sub-zero reading of -0.20. This marks statistically insignificant improvement from -0.23 in January 2012.

More ominously, the reading posts 17th consecutive monthly below-zero reading. Put differently, on monthly average basis, eurocoin has been posting sub-zero readings since March 2011.

Y/y comparatives are even worse. Back in February 2012 the indicator stood at -0.06, and in February 2011 it was running at a blistering pace of +0.57, while in February 2010 we had a reading of +0.77. In fact, this is the lowest reading for any February since the depths of the Great Recession in February 2009.

Two charts to illustrate the eurocoin dynamics and associated implied growth forecasts:

  • 3mo MA is now at -0.233, while 6mo MA is at -0.267. 2008-2009 crisis-period average was -0.31. Draw your own conclusions (STDEV = 0.471 for historical record and 0.560 for the crisis period).

As I pointed out before, the last 12 months of economic performance in the euro area have shown very clearly that the ECB monetary policy stance is not working. Here are the same illustration (updated to February 2013 figures) once again:

Growth-consistent level of the ECB rates is zero. Meanwhile, with slowly moderating inflation still above the target, inflation-consistent rates are probably closer to 1.25-1.5%.

Inexistent fiscal policy at the euro area level is matched by the dysfunctional monetary policy. Next stop? Possibly political psychosis?

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