Euroland industry stuck in reverse gear

The stabilisation in the Euroland economic outlook that had seemed nascent since the beginning of 2019 is at risk from the ongoing difficulties in the industrial sector. This is shown by the current development of DZ BANK’s Euro-Indicator. Our economic leading indicator dipped again in March, by 0.2 percent, having recovered slightly in January and February 2019.

While almost half of the individual indicators that feed into the computation of the Euro-Indicator tended at least slightly positively in the past month, the industrial sector made a clearly negative contribution. The deterioration in manufacturing purchasing manager sentiment had a particularly unfavourable effect. According to the Markit survey, in March the EMU industrial sector saw the largest business losses in almost six years. Moreover, production expectations in manufacturing have fallen for the fourth consecutive time.

Amongst private households, by contrast, an essentially upbeat sentiment prevails. While they likewise do not rate the economic outlook quite as positively as a year ago, things have started to look up since the beginning of 2019. Expectations as regards their own financial situation are especially rosy. It is more than three years since they have been this positive. This probably relates to the fact that private households continue to rate labour market conditions and job prospects as very good.

In the past month, there was once again a mixed bag of economic signals from the financial markets. On the equity markets, prices have continued to bounce back. The MSCI Index for the Eurozone rose on average for the month by about three percent. The yields for long government bonds fell further in March. The mean for the month was only just above zero and they have since fallen further. This and the reduced differential to money market rates can be read as negative economic signals from the market.

On balance, the EMU economic outlook thus remains unsteady. While since the beginning of 2019 there have been signs of stabilisation, the data does not yet point to the trend having clearly turned around.

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