Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
This Invisible Tech Stock Threatens Amazon with 800,000+ Online Stores - 21st Nov 19
Crude Oil Price Begins To Move Lower - 21st Nov 19
Cracks Spread in the Precious Metals Bullion Banks’ Price Management System - 21st Nov 19
Why Record-High Stock Prices Mean You Should Buy More - 20th Nov 19
This Invisible Company Powers Almost the Entire Finance Industry - 20th Nov 19
Zig-Zagging Gold Is Not Necessarily Bearish Gold - 20th Nov 19
Legal Status of Cannabis Seeds in the UK - 20th Nov 19
The Next Gold Rush Could Be About To Happen Here - 20th Nov 19
China's Grand Plan to Take Over the World - 19th Nov 19
Interest Rates Heading Zero or Negative to Prop Up Debt Bubble - 19th Nov 19
Plethora of Potential Financial Crisis Triggers - 19th Nov 19
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

Euro-zone Economy Sinking Fast Towards Recession

Economics / Euro-Zone Sep 25, 2008 - 02:36 PM GMT

By: Victoria_Marklew

Economics

Best Financial Markets Analysis ArticleA month ago, two of our favorite leading indicators for the Euro-zone economy were pointing to a slowdown but not an outright stop, and we were still hopeful that signs of recovery could be cropping up by the end of this year. One month on, the outlook has deteriorated.

Germany's Ifo business climate index for September - a poll of around 7,000 firms - deteriorated for the fourth consecutive month, coming in at 92.9 (94.8 in August). The gauge of current conditions dropped to 99.8 (103.2 in August) and the expectations index slipped to 86.5 (from 87.0), its lowest level in 15 years. The overall index is still above the lows recorded in late 2002, the last time Germany was headed into recession.


However, as we've noted before, the speed of the recent fall is disconcerting. Or, as the Institute stated in its own commentary: "The downward trend...is proceeding in large steps." It should also be noted that about 60% of the survey's responses were gathered before last week's news about the collapse of Lehman and the rescue of AIG. It is therefore highly likely that the business climate index for October will be significantly lower.

Chart 1

The September Belgian National Bank business confidence index (a leading indicator for Euro-zone growth about six months out), released yesterday, dropped to a five-year low, coming in at -14.1 (-5.9 in August). Confidence deteriorated in all sectors, with a notable decline in manufacturing (falling to -15.8 from -5.6 in August). The BNB reported that indicators relating to domestic and export demand "deteriorated considerably."

Chart 2

Not surprisingly, other business confidence indicators have also been gloomy. French business confidence fell to a five-year low this month, with the main index reading just 92.9, while Italy's came in at 82.7 - the lowest since September 2001.

Chart 3

Yesterday also brought a slew of flash purchasing managers' indices from the major Euro-zone economies - and all the news was gloomy. The Markit composite PMI for Germany (combining the manufacturing and services surveys) fell to 48.6 (50.5 in August), with the manufacturing index dropping to 48.1 (49.7 in August), its lowest in eight years, and the services index edging below the growth-contraction mark of 50, coming in at 49.3 (51.4 in August).

In France, a slight improvement in the services index helped the Markit/CDAF composite PMI to recover slightly, to 47.7 (46.9 in August), but the manufacturing index saw its sharpest fall in six and a half years, dropping from 45.8 in August to just 43.6. Not surprisingly, the composite PMI for the Euro-zone as a whole fell from 48.0 last month to 47.0, with the manufacturing PMI dropping to a seven-year low of 45.3 (47.6 in August) and the services index stalled at 48.2 (48.5 in August).

All of which confirms our earlier suspicion that the Euro-zone will see a second quarter of contraction in Q3, and significantly increases the risk that Q4 will bring further negative growth. Upcoming data releases to watch include the German Gfk consumer confidence survey for October (due September 25), preliminary German inflation (September 26), Euro-zone September sentiment surveys (September 29) and flash Euro-zone inflation data for September (30th).

By Victoria Marklew
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Victoria Marklew is Vice President and International Economist at The Northern Trust Company, Chicago. She joined the Bank in 1991, and works in the Economic Research Department, where she assesses country lending and investment risk, focusing in particular on Asia. Ms. Marklew has a B.A. degree from the University of London, an M.Sc. from the London School of Economics, and a Ph.D. in Political Economy from the University of Pennsylvania. She is the author of Cash, Crisis, and Corporate Governance: The Role of National Financial Systems in Industrial Restructuring (University of Michigan Press, 1995).

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

Victoria Marklew Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules