The rebound in Eurozone economic confidence indicators is a mirage of recovery. There is a massive gulf between economic hope and economic reality. Eurozone economic activity is underwater and the recession tide is showing no signs of turning for a long while. Eurozone economic sentiment rose for a fourth successive month, but the odds are that we are probably going to see a second successive year of recession in the Eurozone. All the main components of demand remain under duress. Consumers are heavily battened down, the corporate sector has gone to ground, global trade flows are slowing and government austerity looks set to continue for years.
The message remains very clear for the ECB. Rates need to go lower and stay low for many years as they have done in the US, Japan and the UK. Near-zero interest rates combined with extended quantitative easing should be the ECB’s clarion call. Unfortunately it will not be heard from the Bundesbank’s lips and they hold the whip hand for policy in the ECB at the end of the day. The recession looks set to extend throughout 2013, with a faint chance of muted recovery in 2014.
Highlights
- Eurozone economic sentiment rose to 91.1 in February from 89.5 in January
- Industrial sentiment rose to -11.2 vs -13.8
- Consumer sentiment edged up to -23.6 vs -23.9
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