Is the Eurozone Economy Stabilizing?

Posted Friday, January 17, 2020 by
Skerdian Meta • 1 min read

The economy of the Eurozone weakened considerably last year, with several sectors in contraction/recession, such as manufacturing and industrial production. The European Central Bank panicked and cut deposit rates further to -0.50%, introducing another QE programme as well in November.

Although, in recent months we have seen some signs of stabilization. The ECB has also seen that and we have heard certain members pointing at that in recent weeks. Inflation fell to 0.7%-0.8% earlier last year, but has picked up above 1% and is stabilizing there now.

Today, the final CPI (consumer price index) reading came in and headline, as well as core CPI remained at 1.3%, which should remove some of the burden off the ECB. Below is the inflation report for December and construction report for November:

Inflation Report

  • Eurozone December final core CPI YoY +1.3% vs +1.3% prelim
  • Final CPI +1.3% vs +1.3% y/y prelim

Construction Report

  • Eurozone November construction output +0.7% vs -1.0% m/m prior
  • Prior -1.0%; revised to -0.5%
  • Construction output YoY +1.4%
  • Prior +0.3%; revised to +0.9%

This is a decent inflation report for the actual time, when inflation is falling everywhere. A decent improvement in construction activity as well, with a positive revision to the October reading to show for. This will at least add to the green shoots seen recently in the euro area economy and the ECB surely welcomes that. This is one less reason for the Euro to be bearish.

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