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The Eurozone’s “Nascent” Recovery – Bill Black

The Eurozone’s “Nascent” Recovery

By William K. Black On January 19, 2014 I posted a column entitled “Deflation: The Failed Macroeconomic Paradigm Plumbs New Depths of Self-Parody” that discussed the insanity of the Eurozone’s approach to “the threat of deflation.”  The EU’s troika cannot … Continue reading

The Eurozone’s “Nascent” Recovery

Euro area’s persistent credit contraction – Sober Look

In spite of a number of positive economic indicators out of the Eurozone (see example), credit growth remains the area’s Achilles’ heel. The latest private sector loan growth aggregate from the ECB shows an annual decline of 1.8% (adjusted for sales and securitization – see press release). Here is what it looks like for the area’s households and corporations.

Germany and France economic divergence – Sober Look

The Eurozone recovery continues to be uneven, powered primarily by a pickup in export-driven manufacturing and with only some nations participating. In particular we are witnessing a significant divergence between the area’s two largest economies, Germany and France. As German manufacturing firms gain momentum (see post), the French recovery has stalled.

The Telegraph: – Figures showing private sector growth across the Eurozone have underlined the widening chasm between the bloc’s economic giants, Germany and France, with the latter increasingly looking like the “sick man of Europe”. …

… looking at the separate surveys, it is clear that Germany is pulling away from France. Germany’s manufacturing sector grew at its fastest clip in 30 months, and services are expanding too. But in France, both sectors are in a sharpening decline.

it’s the unbalanced nature of the upturn among member states that is the most worrying. France looks increasingly like the new ‘sick man of Europe’, as a second successive monthly contraction may translate into another quarterly decline in GDP, pushing the country back into a technical recession. In contrast, the December survey data round off a solid quarter of growth in Germany, in which GDP looks set to rise by 0.5pc.

The following chart of manufacturing PMI trends tells the story of divergence. Note that a reading below 50 represents a contraction in the manufacturing sector.


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