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    EcoWeek of 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.
    EcoWeek of 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).
    EcoWeek of 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.

On the Same Theme

Federal Reserve: monetary policy self-assessment 3/8/2019
  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.
Uncertainty: a moderate decline 3/8/2019
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).
Where climate change and inclusive growth meet 2/27/2019
Climate change and inclusive growth are closely linked. Low income households will tend to suffer more from the negative economic consequences of global warming. Policy measures to reduce carbon emissions may also have a relatively speaking bigger impact on low income households. These topics are discussed by William De Vijlder in the final podcast of this series. Interview conducted with François Doux.  
Sustainable globalisation 2/19/2019
Globalisation has traditionally been considered as an irreversible development underpinned by four key drivers: choices by households and companies; technology, which meant that distance became less and less a hurdle in optimising the business of a company; financial markets, with the opening up of capital accounts; pro-free trade government policies. It has become under pressure in recent years (not everybody has benefitted; impact on the environment; problem of speculative capital flows) so it is necessary to make globalisation sustainable. Go further : discover the podcast series dedicated to sustainable globalisation.
Foreign versus domestic drivers of weaker sentiment 2/15/2019
 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. 
Getting to a low carbon economy 2/7/2019
The Paris climate deal, concluded at the COP21 in 2015, pleads for keeping global warming below 1.5°C above pre-industrial levels. However, in its latest report, the IPCC (Intergovernmental Panel on Climate Change) warns that current mitigation policies are insufficient to obtain this objective. Investments in renewable energy and electricity infrastructure have to be stepped up. The power sector has to be decarbonised, the use of electricity increased, and energy efficiency improved. Low carbon policies are difficult to implement because of commercial interests and social impact, in particular concerning the increase in carbon prices. Nevertheless, to achieve substantial reductions in greenhouse gas emissions, a different approach is needed, including carbon pricing and trade sanctions.
What explains the downward revisions to growth? 2/7/2019
The recent weakening of economic data has led to a downward revision in growth forecasts of the IMF and in the ECB Survey of Professional Forecasters. We have lowered our eurozone forecasts for 2019 as well.
Why recessions trigger fear 1/29/2019
A significant growth slowdown triggers anxiety that worse is to come. Households and companies hate uncertainty, confidence drops and a negative spiral develops. Although central banks may adopt a more dovish tone, the minds will still be dominated by a feeling that growth is missing.
Slowdowns, households, companies and banks 1/29/2019
Slower growth will raise the concern of households that unemployment will increase. Greater caution means less spending. Companies will scale back investments because they represent a long horizon commitment which moreover is irreversible. Reduced visibility means companies will be reluctant to commit for the long run. Banks will also become more cautious in extending credit, being concerned that the balance sheet quality of customer will suffer from a period of negative growth.
“When the tide goes out”. Market psychology during economic downturns 1/29/2019
The stylised facts of a recession (considerable drop in equity prices, widening of the spread between corporate and government bonds) imply that during a slowdown, investors will focus their attention on the likelihood of entering a recession. The sensitivity to bad news increases, the investment horizon shortens and volatility rises, with a detrimental impact on growth.

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