Euroland’s economic prospects steadied up at the beginning of the year, but this was short-lived; with the onset of spring industry has shown renewed signs of weakness. This is revealed by the current trend for the DZ BANK Euro-Indicator, which in April 2019 (as in the prior month) fell by 0.2 percent. The annual change in the indicator now runs at -2.0 percent and is thus slightly lower than in March (-1.9 percent).
A glance at the components that go to make up the Euro-Indicator clearly shows that the weak phase in industry has now persisted for about six months. Unlike at the beginning of the year, the positive impulses from other sectors did not suffice in March or April to offset the downwards trend in export-heavy manufacturing.
In this context, in April the Euroland industrial purchasing managers were no longer as pessimistic as they had been in March. The index computed by IHS Markit improved slightly on the previous month, but remained relatively deep in negative territory. As regards the production expectations in manufacturing calculated by the European Commission, things dropped sharply in April, by contrast. The net balance is now at the lowest point in more than five years and in fact below the long-term median, added to which industrial corporations’ order books have now been deteriorating for five months.
Unlike in the prior months, in April private households did not provide a positive stimulus. Consumer confidence, measured in terms of the European Commission survey, has dropped to the lowest point in almost three years. This has primarily resulted from the fact that expectations as regards macroeconomic developments recently fell again. By contrast, consumers’ assessments of employment and personal income outlook both remain very upbeat, meaning the willingness to make larger purchases has remained at a high level.
In April, the signals from the financial markets were positive on balance. The upwards trend persisted on the equity markets, with the MSCI Index for Euroland rising almost four percent on average for the month. Yields on long-end government bonds fell further in the past month, further narrowing the difference to the money market interest rate and signifying a negative factor for the Euro-Indicator. The real growth rate in the money supply has been spurred of late by low inflation rates. In other words, all in all, optimism would seem to continue to prevail in the financial markets.