ecoweek
    EcoWeek of 07 December 2018
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    Oil and metals prices are down significantly this year. For oil this seems to be predominantly driven by supply factors. The decline of metal prices probably reflects the softening of global growth. There is a clear negative relationship between oil price changes and subsequent US real GDP growth. US growth is expected to face a number of headwinds in 2019 but the decline of the price of oil should act as a tailwind.
    Except consumer confidence, which dropped off sharply in November, surprising again on the downside and still standing well below its average, the other economic indicators available to date are positive.
    EcoWeek of 30 November 2018
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    Australia has seen 27 years without a recession and IMF and OECD forecasts show ongoing growth in coming years. Population growth, productivity growth, commodity exports to China and other fast growing Asian economies have played an important role together with policy aimed at enhancing economic flexibility. The floating exchange rate has been an important countercyclical and hence stabilising factor . The housing boom has become a source of concern from a financial stability perspective with recent prudential measures allowing for a “positive correction”.
    Most indicators remain above their long term average and several, of which the all-important non-farm payrolls, have surprised to the upside. Ongoing strong growth is reflected in the Atlanta Fed nowcast for the current quarter (an annualised 2.6% versus the previous quarter).
    EcoWeek of 23 November 2018
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    Support seems to be growing for the proposal of France and Germany for a eurozone budget. This would contribute to a much needed enhancement of economic resilience, that is the ability to cope with shocks. Resilience can also be strengthened through private and public risk sharing and policies seeking to boost potential growth. Boosting resilience is all the more important considering that risks to global growth seem to be tilted to the downside.
    Poland’s GDP growth surprised to the upside in Q3 (+5.7% y/y), the strongest quarterly reading in ten years, after an already strong performance in H1 (+5% y/y). Economic growth was driven by booming private consumption and a pick-up in EU funded investment, while exports lost steam.

On the Same Theme

IFRS 9 first time adoption: Significant cost differentials amongst banks 11/28/2018
The adoption of IFRS 9 accounting standard on 1st January 2018 significantly changes the impairment model for bank assets. Expected credit losses (and not only incurred losses) are now recognised using a more prospective approach than previously required. IFRS 9 introduces an intermediary category for performing assets whose credit risk has nonetheless increased significantly since their initial recognition, even though no credit event has occurred. Such “phase 2” led banks to recognise additional provisions for impairment whereas the quality of their portfolios remained unchanged. The decline in common equity tier 1 attributable to IFRS 9 should not be interpreted as a decline in banks’ loss absorbing capacity. Some of the prior “unexpected losses”, previously covered by regulatory capital, are now covered by accounting provisions replacing the former.
Cooler sentiment 11/9/2018
Sentiment indicators continue their softening trend and the flash estimate points towards weak third quarter GDP growth. Yet drivers of final demand continue to point towards ongoing good growth in the upcoming quarters. Data in the coming weeks as well as developments concerning Brexit and US trade policy will be key to confirm or tune down this assessment. 
Eurozone: Credit pulse 10/31/2018
After a rebound in June, the pulse of lending stabilized in September. This dynamism is due to the continued acceleration of loans to non-financial corporations and, to a lesser extent, households. Loan demand by households remains more favorably oriented than that of non-financial corporations, while the credit conditions continue to ease but not as fast as in August.
Eurozone: heading towards slower growth 10/26/2018
Judging by recent macroeconomic indicators, beating consensus expectations is becoming increasingly challenging. Moreover, certain indicators are now close to or even below their long term average. These developments point towards a softer growth outlook. At yesterday’s ECB press conference, Mario Draghi described this as a loss of momentum whereby growth normalises, coming from a pace which was well above the potential growth rate. The view that it’s a normalisation and not a downturn is based on a combination of factors: income growth, corporate earnings growth, credit growth, low interest rates. Uncertainty has increased (Brexit, market volatility, Italy’s budget) but to quote the ECB “risks remain balanced”.
ECB: still confident 10/26/2018
The ECB is still confident. That is the message from Mario Draghi’s press conference following the Governing Council meeting.
Strengthening the eurozone: prospect of progress at last? 10/19/2018
The German finance minister has made a plea for the creation of a pan-European unemployment fund. Being able to borrow from the fund would require having contributed in the past as well as having met certain criteria in terms of economic policy. This form of risk-sharing would soften the impact of downturns and hence would be an important contribution to strengthen the eurozone.
The long road to normalisation 10/18/2018
Growth has been moderating in 2018, although remaining above potential. Prices pressure are increasing as signalled by high levels of capacity utilisation, declining unemployment and rising wages. As underlying inflation is projected to move towards the ECB’s 2% ceiling, the central bank decided to reduce net asset purchases and possibly halt them from January 2019. Policy rates will remain unchanged at least through the summer of 2019. The policy mix should stay expansionary and GDP growth may moderate towards its trend rate in 2019.
Eurozone: Banking systems slightly decrease their exposure to sovereign debt 9/26/2018
With the exception of Italian and Portuguese banking systems, the main eurozone banking systems have reduced their exposure to sovereign debt between July 2017 and July 2018. The exposure of the eurozone banking system as a whole has decreased from 5.1% of banking assets to 4.8% over the same period. Most of the banking systems have reduced their global exposure to sovereign debt, especially towards domestic debt securities but less towards those of other Member States. Greek and, to a lesser extent, Spanish banks have decreased their exposure towards domestic sovereign debt. However, they also have increased their exposure towards sovereign debt of other Member States. Portuguese and Irish banking systems focused their buying on debt securities issued by other Members States. Finally, if Italian banks have, like Portuguese banks, increased their global exposure, their buying of domestic debt securities has grown more than twice as strong as their buying of sovereign debt of other Member States.
The eurozone 10 years after 9/19/2018
In the run-up to the financial crisis, low interest rates had stimulated real estate investment and economic activity, in particular in the periphery countries. Household debt increased rapidly and housing bubbles emerged. The Lehman Brothers bankruptcy made an abrupt end to the buoyancy. Property bubbles burst and bank lending dried up. Government debt increased rapidly because of automatic stabilisers, fiscal stimulus packages and support to the financial sector. Ten years later, indebtedness of the non-financial sector in the core and the periphery countries is virtually the same, although substantially higher than before the crisis. The mix is quite different though. In the core countries, government, household and non-financial corporations have all increased their indebtedness as low interest rates make borrowing attractive. The periphery has seen deleveraging by households and non-financial corporations but government debt has risen very significantly. This increases the sensitivity of public finances to the cycle and bond yields.
Growth above potential but less than before 9/14/2018
The majority of indicators are above their long-term average, reflecting above potential GDP growth. As is well known, core inflation remains low. The move to a somewhat softer growth environment is reflected in the small number of data which still manage to surprise to the upside whereas the rest is either in line with or even below expectations.

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