Peter Vanden Houte, chief economist at ING, points out that the European Commission’s economic sentiment indicator (ESI) continued its decline in January to 106.2 from 107.4 in December last year.
Key Quotes
“The outcome was worse than expected as the estimated consensus was 106.8. The bigger countries including Germany (-0.8), Italy (-1.3) and the Netherlands (-4.1) saw confidence slip, while it remained broadly stable in Spain (+0.1). What’s interesting is that despite the ‘yellow vest’ protest, France actually saw a 0.5 point pick-up in sentiment.”
“The manufacturing sector (-1.8), the services sector (-1.2) and retail trade (-1.8) all saw a drop in confidence. However, construction confidence actually increased (+0.9). Another positive note was the 0.4 point rise in consumer confidence.”
“While the GDP figures coming in for the fourth quarter are less dramatic than one could have feared (e.g. +0.3% in France), there are no signs of an acceleration in GDP growth.”
“At this point, we think the risk of a recession this year still remains low, unless all downward risks materialise. That said, the best now lies behind us, and Eurozone growth should come out between 1.0% and 1.5% in 2019, nothing to cheer about. We, therefore, think ECB policy will have to remain very supportive and we expect the ECB to decide on a new (T)LTRO for the banks by June, to keep easy credit conditions in place.”
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