Eurozone recovery signs (Barclays)

By Tania Suárez, Madrid | European markets suffered form a slight contraction on Wednesday whereas the U.S. stood firm, not influenced by the European weakness nor the consumer confidence data and the Richmond. Barclays team suggest that money supply data meant both good news and bad news. Good ones first:

The trend in Europe is to raise liquidity, and usually (not always), that is associated with an economic recovery.”

According to Barclays’ sources, trends to increase liquidity are linked to a rebound in economic activity within a few months. M1 has been going up for almost six months, which indicates that “economic activity in the euro area may begin to show signs of recovery.”

In fact, “the European PMI, although weak, have surprised positively.” This, according to specialized sources of Barclays is “a positive message for Europe”, although they point out that “growth in Europe will be uneven”, which directly affects the Spanish citizens.

What about bad news? The Spanish recovery remains pretty sluggish.

“The contraction of deposits in our country is -10.9%, about 65 bn, of which 40 are of ‘other financial institutions'”. This means that most of the outlets take place “because those institutions have taken money from the deposits and cannot issue new assets,” Barclays experts explain.

Nevertheless, “the landscape of the country is not good, household deposits fell by -8.2%, while non-financial companies -10.2, loans to households fell by -2.3% and loans to businesses a -7.8%,” according to Barclays experts. And there are no signs of a tendency to liquidity in Spain.

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