Eurozone Economy Faces Weak Confidence
Confidence in the eurozone industry has fallen to its lowest in six years. The weakening largely comes from the uncertainty over Brexit, as well as the trade tensions.
More industry managers are revising down their outlook for employment, with concerns about customers.
The weakening pulled down a metric that economists use to measure economic sentiment. The figures showed readings that were the lowest since 2015.
The Brexit uncertainty and global trade tensions have pummeled manufacturing across the European region. The adverse damage is particularly obvious when one looks at the German economy.
The European Commission said that sentiment has been largely pessimistic on all aspects, like production outlook, order books, and others.
Services, on the other hand, have moved a tad higher in terms of confidence this month. However, the number still sits at a record-low level.
At present, developments in the political landscape of the eurozone have not been good for the economy.
Specifically, a no-deal Brexit scenario has been looming over the politics between the UK and the EU. Spain’s acting Prime Minister Pedro Sanchez recently said that a no-deal Brexit was the biggest threat to Spain’s economy.
The European Central Bank (ECB), along with other major central banks, have been fighting weak growth with rate cuts and other measures.
Trade tensions are also dominant. International economic institutions have repeatedly warned against trade protectionism and its adverse effects.
Metrics of global economic growth also shrank, with OECD cutting its euro-area outlook this week. it said that the global economy with just the growth of 2.9% this year.
Silver Lining in the Eurozone
Although the European region has been dealing with a lot of pressure lately, there’s a bit of silver lining. Some monetary developments are pretty good.
For instance, the broad money supply rose from 5.1% in July to 5.7% in August on a year-on-year basis. The narrow money supply M1 has driven this growth.
It’s remarkable because the real money supply is one of the leading indicators of the European economy. While the time lag may still be worrisome, it does promise a better view of the economy.
Apart from that, private sector borrowing also perked up. While uncertainty looms large, borrowing still grew at a decent pace.
Even though borrowing growth doesn’t really boost the eurozone GDP, it proves that loose monetary policy managed to boost lending growth.
The service sector also provides a different view of the economy. Service sector sentiment rose from 9.2 to 9.5 in the month of September.
Although this is a smaller growth than the August drop, it does signal stabilization in the sector. This is good because such stabilization is necessary in light of the contracting manufacturing sector.
The labor market also signals some encouraging movements. There have been more optimistic reviews of recent and future employment needs. This means that the labor market strength may be strong enough to keep domestic demand at good levels.
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