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    15 March 2019
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    The plethora of data released this week didn’t remove concern about the Chinese growth slowdown. Lunar holiday bias and the recent fiscal stimulus measures imply it is too early to draw firm conclusions. The matter is important for the global economy given China’s weight. It is also important for key exporters to China such as Germany. Against this background, reaching a trade agreement with the US  becomes key.
    The latest economic indicators all surprised favourably (positive z-score on the x-axis), reinforcing the global picture of a slow but resistant French growth and, consequently, our Q1 growth forecast of 0.3% QoQ.
    08 March 2019
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      The Federal Reserve will conduct a review of its monetary policy framework and the conclusions will be made public in the first half of 2020. Three questions will be addressed: should the monetary policy stance take into account past misses of the inflation objective? Are the tools adequate? How can communication be improved? The initiative should be welcomed because it shows the Fed’s efforts for being ready when the next recession hits. Facing similar challenges, the ECB is likely to be interested in the outcome of the Fed research.
    When households (companies) feel more uncertain, they will spend (invest) less. After a jump last year, the number of media articles mentioning uncertainty, has declined somewhat recently (top left chart).
    01 March 2019
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    The latest survey data show a very mixed picture. In the manufacturing sector, China saw some signs of stabilisation, whereas Japan experienced a deterioration. In Germany, manufacturing remains under pressure. The picture in the eurozone is quite diverse, depending on the country and the sector. Looking at the broadest survey indicator for the eurozone, one observes a stabilisation. Whether this will be confirmed depends to a large degree on developments in China and on the well-known sources of uncertainty (trade, Brexit).
    Negative surprises were in abundance in industry in February. Contrary to expectations, industrial production weakened further in December due to a sharp decline in construction activity. The only hopeful sign was the strong rebound in the car industry (+7%). The forward-looking indicators also surprised on the downside.
    22 February 2019
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    Considering its considerable weight in world GDP, slower growth in China causes spillover effects. Over the past 12 months, countries which are more exposed to China in terms of exports have seen a bigger drop in their new export order assessment. In Germany there is a close correlation between the Chinese purchasing managers index and the assessment of exports in the PMI. This shows that Germany and, by extension, Europe as a whole should hope that recent Chinese growth support measures will be successful.
    In the United States, positive cyclical surprises have become rare: employment figures and the ISM purchasing managers’ index were the only statistics that surpassed expectations in January. Yet these are solid indicators. Moreover, although industrial output and retail sales were disappointing, they were probably caused by poor weather conditions (extreme cold wave) or temporary factors (government shutdown). For the moment, the US economy still seems to be poised for a smooth landing.
    15 February 2019
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     Since early 2018, based on the purchasing manager indices, a large number of countries have witnessed a decline in the assessment of new export orders which was bigger than the decline of the general climate in manufacturing. This suggests a dominance of foreign demand shocks, rather than domestic shocks, in explaining slower overall growth. The drop in new export orders echoes the significant slowdown in world trade growth. This is probably related to slower Chinese growth and, in many countries, slower growth in capital expenditures, which have a higher import content than consumption. Trade-related uncertainty may also play a role. 
    During the last quarter of 2018, the annual growth of loans to private non-financial sector in the euro area stabilized at around 3.3%. However, survey data have showed a lower increase in the net demand of both households and enterprises since the beginning of 2018. Furthermore, and unlike in 2018, banks no longer plan to ease their conditions in 2019 Q1. In addition to the economic slowdown, these factors could weigh on the developments of loans outstanding in the euro area during the next quarters
    08 February 2019
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    The European Commission now expects 1.3% growth for the eurozone this year, down from 1.9% in its previous forecast. This downward adjustment doesn’t come as a surprise, considering the declining trend of several survey indicators. The recent performance of these indicators in tracking GDP growth is mixed, which makes the assessment of the current growth momentum challenging.
    Most economic data remain low regarding their long-term average. Following three months of decline, the PMI services stabilized in January (51.2) and surprised on the upside. Economic growth in the Eurozone remained stable at 0.2% q/q in Q4 2018, reflecting divergent developments. In particular, Italy slipped into recession in late 2018 while French growth was resilient. Core inflation, still well below ECB’s medium-term inflation target, was above expectations.
    01 February 2019
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    Although US growth remains strong, global headwinds, softer survey data and tighter financial conditions have put the FOMC in risk management mode. Policy remains data dependent, but a patient stance will be adopted before deciding on the next move in monetary policy. Inflation, which remains well under control, facilitates this wait-and-see attitude. Markets are now pricing in a policy easing in the course of 2020. More than anything else, this shows to which extent uncertainty has taken its toll on confidence.
    According to the INSEE first estimate, French real GDP rose by 0.3% q/q in Q4 2018. This figure is not a strong one but this is still relatively good news as growth was slightly above expectations (surprising on the upside for the first time in 2018) and slightly above Eurozone growth (for the second quarter in a row).
    25 January 2019
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    The recent “economists’ statement on carbon dividends” offers important policy prescriptions for the US to address global warming. It explicitly refers to the need for a border carbon adjustment system so as to maintain competitiveness versus countries that would not have introduced a carbon tax. The authors recommend that the carbon tax proceeds be equally distributed to US citizens. It could be envisaged to use these proceeds in a way which takes into account the distributional aspects of environmental taxes whilst promoting energy efficiency investments.
    In China, real GDP growth slowed to 6.4% in Q4 2018 year-on-year from 6.5% in Q3. The slowdown in the industrial sector worsened in Q4 while growth in the services sector remains more dynamic. Regarding demand components, exports have weakened markedly in the two last months of 2018, mostly due to the impact of US tariff hikes on imports of Chinese goods. Growth in household consumption has continued to decelerate (especially in the car market).
    18 January 2019
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    Market reaction suggests that the parliamentary vote, with a wide majority, against the Brexit deal which had been negotiated with Europe, has reduced the likelihood of a no-deal Brexit. Whether this feeling of relief lasts will depend on how the discussions on possible outcomes evolve. The economic headwind which comes with this prolonged uncertainty, for the UK but also for the companies in the EU which trade with the UK, will not go away soon.
    The economic policy uncertainty index, which is based on media coverage of this topic, has seen a huge increase since the middle of last year, even surpassing the previous high reached at the end of 2016. Measures of business uncertainty in Germany and the US have also risen. The dispersion of individual stock returns, a third measure of uncertainty, has also increased in the US and to a lesser extent in the eurozone.
    11 January 2019
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    Fed chairman Powell has recently emphasized that the FOMC will be patient given the muted inflation reading and that it is ready to shift the policy stance swiftly if required. He also considers that financial markets are pricing in downside risks well ahead of the data. This means that they are too pessimistic on growth. Professional forecasters' estimates of the probability of entering into recession in the coming quarters do not display the typical pre-recession dynamics either.
    For Germany, 2019 started with a hangover. Most indicators that we follow are below their long-term average and all surprised on the downside. In particular, the export-oriented manufacturing sector has been badly affected.
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