BoAML | We have remained quite bearish on Euro area inflation for the past few years, particularly compared with ECB forecasts (but also consensus), and have highlighted the many downside risks to the inflation outlook.
James Alexander via Historinhas | While still waiting for the 1Q16 official Eurostat NGDP figure for the Euro Area of 19 countries it has been interesting to have a look at the implied deflators for the currency bloc and its constituents. (Ireland, Slovakia, Cyprus and Luxemburg are all hopelessly late delivering GDP figures, and the first two don’t even seem to do it to Eurostat standards for calendar-adjusted data.)
Since it opted for an unconventional expansive monetary policy, the different measures implemented by the ECB, and particularly its latest decisions, are changing the Eurozone’s financial structure. For example, the option of a very long term maturity offered on sovereign bond issues, as well as the increase in companies’ financing via the issue of corporate debt, with the consequent decline in their dependence on the banks.
Roberto Tamborini, author, Professor of Economy at Trento University says The Corner at this interview that “we can only start on the road towards a satisfactory recovery with fiscal and monetary coordination in the eurozone, and this fiscal stimulus can only be coordinated via Brussels. This directly calls into question the eurozone’s economic governance, one of the pillars of which is the Maastrich principle of exclusive national responsability.”
BoAML | Even with structural reforms, trend GDP growth may not be consistent with comfortable debt sustainability in key peripherals by the time inflation normalizes. If the euro area does not make progress towards fiscal union in the meantime, the ECB will likely have to remain involved on the bond market.
The 2008 financial crisis was not a one-off event. The resources that were available to cope with that crisis would not necessarily be there if there was another crisis. Government debt and GDP ratios are still high, and pension and health costs are escalating across Europe.
BARCLAYS | Euro area Q1 preliminary GDP was revised down slightly to 0.5 % q/q from the flash release (-0.03pp), accelerating from Q4 0.3% q/q growth. German GDP rose 0.7% q/q, in line with our expectations, as robust domestic demand offset weak exports.
James Alexander via Historinhas | A couple of my recent posts have focused on the immeasurability of inflation and the consequent immeasurability of RGDP. And, therefore, the unsuitability of using either as a guide to monetary policy, especially a notional “gap” between an unmeasurable RGDP and a theoretical maximum, but still unmeasurable, RGDP.
UBS | We conducted a survey to determine whether Eurozone corporates are starting to invest again, and how this would be funded – a crucial question not just for the business cycle, but also for individual sectors and stocks.
James Alexander via Historinhas | Despite all the pessimism the Euro Area nearly caught up with US NGDP growth in Q4. Now that Italy and Spain have finally reported their Nominal GDP figures Eurostat shows that 4Q15 NGDP growth for the Euro monetary region as a whole was almost as fast, year-on-year, as the US.