- Real-time €-coin GDP tracker points to turnaround
- Euro area presently led by services, mining, oil & gas
- Financials, carmakers, leisure firms remain under pressure
The euro area recovery may well be around the corner, with the transportation,
energy, and service sectors showing particular strength. Photo: iStock
By Peter Garnry
In client meetings and presentations, I always talk about not reinventing the “macro-wheel”, so here at Saxo we are tracking the €-coin* real-time GDP tracker published by the Bank of Italy and released the first business day after the month tracked.
Today we received the latest figure for May showing a further decline to 0.26 (from 0.28 in April). The decline was driven largely by a slowdown in industry and persistent weakness in the economy’s price level.
Based on the €-coin indicator, the euro area economy is growing at around 1% (annualised). The good thing about today’s figure, however, is that the loss of momentum is slowing down, so the probability has increased that June may be the turning point, leaving May as the short-term bottom in the recent slowdown that started in February.
To no one's surprise, the slowdown in the euro area economy has negatively impacted cyclical industry groups such technology hardware, diversified financials, automobiles, banks, and also leisure/recreational companies (due largely to terrorism).
Interestingly enough, however, another part of the cyclical economy has actually performed the best and those industry groups are mining, steel, transportation, oil & gas, and electrical equipment manufacturing.
While the industrial sector is still slowing down, the service sector is holding up well driving down the unemployment rate across most euro area economies. The turn in June could come from a positive impulse into the industrial sector from the massive stimulus being put into place right now across Asia (China and Japan).
Recent developments in commodity prices could also have a positive impulse through the establishment of a higher price level in the economy.
Other leading indicators from the US and Asia are also showing a likely bottom and some recent data points have actually accelerated, so unless we get any disruptions from events (Brexit etc.), it is our forecast that the economy will accelerate somewhat into the summer months.
The European recovery has taken its time, but recent
signs point to a local bottom. Photo: iStock
* €-coin collates a large collection of statistical data (industrial production, business surveys, stock market and financial data, demand indicators, and more) and extracts the information that is relevant to forecast GDP
— Edited by Michael McKenna
Peter Garnry is head of equity strategy at Saxo Bank