Friday, September 26, 2014

26/9/2014: Eurocoin Signals Accelerating Fall in Economic Activity

Eurocoin, euro area leading growth indicator compiled by Banca d'Italia and CEPR has fallen again in September, indicating further slowdown in growth conditions:

  • In August 2014 Eurocoin indicator stood at 0.19. In September, the indicator fell to 0.13 - its lowest reading in 12 months.
  • Growth forecast consistent with current readings for Q3 2014 are in line with y/y euro area GDP growth of 0% (range between +0.1% and -0.1%).

As usual, updating my ECB Monetary Policy Dilemma chart:

The above shows the proverbial 'growth corner' for ECB: historically low interest rates and virtually zero growth signalled by the leading indicator.

Annualised growth rates are abysmal:

Per release: the latest decline reflects continued losses in consumer and business confidence, slowdown in exports and weakening of industrial production conditions. Those tracking my analysis for previous months would note that in the past Eurocoin was supported to the upside primarily by equity markets valuations. As predicted, these effects are now becoming exhausted and as the result we are witnessing rapid declines in the leading indicator.

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