Why is eurozone growth slowing down?

According to the Fulcrum activity nowcasts, which identified the surge in growth very early last year, the eurozone was still growing at a rate of 3.5 per cent late in 2017. Each of the largest economies in the bloc was doing well: Germany 4 per cent, France 3 per cent, Italy 2 per cent and Spain 3.5 per cent. Economic forecasters and the central bank had become confident that this strong recovery phase would persist throughout 2018. But that has not happened so far.

The latest nowcast results for the eurozone suggest that activity growth has dropped to only 1.2 per cent in early April, with each of the major economies experiencing a sharp decline in growth. Even Germany, which was relatively immune from previous European downturns has recorded a very sharp dip, with growth now down to only around 1 per cent.

That is from Gavyn Davies at the FT.

Comments

Guess my Euro fund ETF won't be doing so well now... I think the reason is that like an old man, the sick man of Europe, not Turkey but the EU, is just too worn out to really grow anymore.

If wages aren't going up in order to increase profits, resulting in slower GDP growth, won't the higher profits increase share prices, increasing the growth in price of the EFTs?

Why would want lower profits and greater utilization of factors of production which eliminates capital scarcity and drives down share prices?

True, if only wages were growing slowly, but the article says GDP is growing slowly, not just wages. Lower GDP = lower sales = lower profits.

The rise of the right wing populists no doubt has contributed to the fall of the economies in Europe. Pessimism may sell politically but not economically. Our own economic growth has depended on robust markets (rising asset prices) in stocks and real estate (I don't know about European markets). What if markets here were more pessimistic, if asset prices were to fall, a fall triggered by (for example) a tech sector that appeared more smoke and mirrors than real. Of course, predicting falling asset prices after an extended period of rising asset prices is a sure bet. There's the old joke that when doctors invest in a market, it's time to get out. Do you know any doctors?

Here is a proposal for the for the prevention of right-wing populists from becoming a burden on European economic growth: open the borders to millions of American liberals that said they'd leave America if Trump won.

Mildly off topic, but one of those liberals who said they would leave if Trump won was Mrs George Stephanopoulos. So did you see her absolutely perfect smear of her husband in People magazine?

https://www.newsbusters.org/blogs/nb/tim-graham/2018/04/15/people-quotes-mrs-stephanopoulos-george-has-so-much-integrity

"I was so blown away when I met him was because he has so much integrity,” she told People. “I went through a bad boy stage before him, and I knew this was a man who wasn’t going to cheat on me, wasn’t going to hit me, or embezzle our money. I’d never be Ruth Madoff.”

Yes, she felt the need to tell the world that she used to sleep with real men but has found security with a gutless eunuch.

Europe's economic growth is slowing down because economic growth is the work of young men taking risks. Not elderly men serving out their time until their pension kicks in. Europe is full of the latter and most of the former are from Vibrant Countries not known for producing much except violence, horrible diseases and children.

So, a guy who has "so much integrity" is really a "gutless eunuch?

I worry for my country.

Here's the rest of the quote. She not only announced to the whole world that she slept with a bunch of "bad boys" before settling down with him at around the age that pregnancies become difficult and the risk of conceiving disabled children rises dramatically, she also said that she, and everyone else, would laugh hysterically if he ever claimed he cheated on her:

"The Go Ask Ali: Half-Baked Advice and Free Lemonade author is so confident in her husband’s fidelity that she would “laugh” if he ever tried to claim he cheated on her.

“I’d start hysterically laughing,” she says. “And so would everyone else, because he’s just known as a stand-up dude.”"

We know he does not have integrity because he is a lying political hack. He would have, for instance, declared his contributions to Hillary's campaign when he was reporting on her if he had an integrity. It is his wife's rationalization. Not the reality.

As for the country, you miss the point. Johnny Cash's I Walk the Line is about a perfect expression of traditional masculinity as you can find in popular American culture. Cash does not say he *can't* cheat on his wife. He says he loves her so much that he doesn't want to and so controls his behavior as much as he can.

I keep a close watch on this heart of mine
I keep my eyes wide open all the time
I keep the ends out for the tie that binds
Because you're mine, I walk the line

It is absurd to think of June Cash disrespecting her husband in public so badly because women had more class back in those days. And because the point is not that he can't but that he tries to make sure he won't. It is like the Pence Rule. Mike Pence realizes that he might be weak, so he is careful to avoid temptation. He is an actual real man.

George's wife, on the other hand, wouldn't care if he goes skinny dipping with strippers. Because he is so pathetic he is unable to cheat on her. Or at least so she says when she chooses to disrespect him in public.

I look at Pence's claim that he does not have dinner alone with a woman as simply a claim to not be able control himself. I mean,does he have so little self control that he does not believe he would be able to turn down an offer of sex? And I will not try to get into what it implies about his attitude towards women.

"I went through a bad boy stage before him..."
The classic Alpha Fux/Beta Bux transition

She would never let the "alphas" get her pregnant...

He's also a 5'6" manlet and towered over by his female colleagues:

"How ‘GMA’ hides George Stephanopoulos’ ‘little-boyish mini-legs’"

https://pagesix.com/2017/07/12/how-gma-hides-george-stephanopoulos-little-boyish-mini-legs/

"“He’s 5-foot-6 and is dwarfed by human trees Robin Roberts and Michael Strahan,” says an insider. “ ‘GMA’ initially thought using an anchor desk with elevated chairs would help the problem. Still awkward, George’s little-boyish mini-legs were seen dangling.”

@Raymond "The rise of the right wing populists no doubt has contributed..." Yes. All populists are right wing, and they have taken over the governance of exactly which European countries? Germany with its one percent growth? Ms. Merkel might disagree. But about this Rayward has "no doubt." That's the thing about prior assumptions: one need not doubt them.

'governance of exactly which European countries'

Poland and Hungary, but no need to doubt that you already knew that, right?

About those nasty horrible Eastern European countries:

In all, as of 2017 the Polish economy has been growing steadily for the past 26 years, a record high in the EU. Such growth has been exponential, with GDP per capita at purchasing power parity growing on average by 6% p.a. over the last 20 years, the most impressive performance in Central Europe resulting in the country doubling its GDP since 1990. ... According to the Central Statistical Office of Poland, in 2010 the Polish economic growth rate was 3.7%, which was one of the best results in Europe. In 2014 its economy grew by 3.3% and in 2015 by 3.8%. Although in 2016 economic growth slowed, government stimulus measures combined with a tighter labour market in late 2016 kick-started new growth, which in 2017 the Polish Central Statistics Office states to be 5.2%.

Poland's economy has grown faster than anyone else in Europe.

Hungary has had more problems because of the politically-motivated classification of Hungary's debt as junk and because the EU has been cutting off funding. But it has still been growing at over 3% per year.

It looks like electing a government of Bumiputra, by Bumiputra and for Bumiputra really does work. Who would have guessed good economic management was possible among rulers who don't hate their own people?

Well, at least you are not disputing that Poland and Hungary are run by right wing populists. Congratulations, you are not as ignorant as Hopaulius.

And there is nothing nasty or horrible about the people in either of those two countries, by the way.

You write, Clockwork, as if "populist governance" were a bad thing.

Unbelievable as this may seem to you, right-wing populist governance wasn't in place in the run-up to the 2008 world-wide financial catastrophe. That would be, for lack of a better name, the mandarins - international and Wall Street bankers (N.B. I didn't use the pejorative, "banksters"), gangsters running huge GSE's (such as HUD, FHLMC, FNMA in the US), corrupt, politicians (redundant/repetitive) like Barney Frank and Christopher Dodd (in the US), central bankers, et al . . .

Even more populist than Hungary and Poland is Iceland. In Iceland, after the 2008 debacle, the government held two in referenda and the people voted "NO" to bailing out (i.e., Icelandic citizens paying off failed banks' creditors over-and-above whatever were the nation's reserves) Icelandic mandarins' failed banks. And, the people of Iceland, unlike most other countries, were not heavily burdened with huge national debt run up by failed bank mandarins.

When people like you use words like "populism" you mean the people who have committed the grave sin of giving the voters policies they like.

So why should I deny it? We should all be ruled by people who don't hate us and give us the policies we voted for.

"growth has been exponential, with GDP per capita at purchasing power parity growing on average by 6% p.a. over the last 20 years, the most impressive performance in Central Europe resulting in the country doubling its GDP since 1990": that arithmetic is wrong; 6% per annum growth would double GDP in 12 years.

I caught that too. Here's the real info. Constant dollar PPP GDP grew from $9521 in 1991 to $26,003 in 2016, a compound annual growth rate of 4.1%.

... slow growth (?) -- the usual suspects are at fault. Here it's the EU government crowd, especially the ECB central banksters. Milton Friedman would not be surprised.

This is not surprising as the work force size is not increasing and it seems impossible to have long term big growth without an increase in work force/population size. The growth of population is still the variable to increases the AD and AS at the same time.

+1 Japanese growth has worn this disguise of stagnation for a while.

More Russia sanctions, Trump trade uncertainty, uncertainty re: Europhile reforms like bank union, uncertainty re: Euroskeptic success, Brexit, higher oil price, euro up vs USD, German coalition uncertainty, less procyclical gov spend than in US (so far, maybe some countries will b less Maastricht-leashed soon)

What about the demographic bonus of all of those Syrian refugees with plenty of young, able-bodied men?

Reversion to the mean ? Growth above 3% has become very rare in any country of Western Europe in the last 20 years.

Exactly. And I'm surprised there is a post on a quarter of growth. Also, yearly growth of 3% has _never_ happened in Western Europe in the past 20 years.

Weather. Beast from East blip.

Where is Europe with respect to business cycle models?

You know the problem with longest expansions on record ..

'Why is eurozone growth slowing down?'

Oddly, the 6am radio SWR1 news had one answer for that regarding Germany - a lack of Fachkraft (skilled workers) is responsible for reducing growth by almost 1%.

For those that can read German - 'Der Mangel an Fachkräften verringert einem Bericht zufolge das deutsche Wirtschaftswachstum um jährlich fast ein Prozent. Das geht aus einer der "Rheinischen Post" vorliegenden noch unveröffentlichten Studie des Instituts der deutschen Wirtschaft hervor. Demnach fehlen etwa 440 000 Fachkräfte. "Wenn deutsche Unternehmen diesen Fachkräftebedarf decken könnten, würde die Wirtschaftsleistung in Deutschland um bis zu 0,9 Prozent oder rund 30 Milliarden Euro höher ausfallen", heißt es in der Studie.' https://www.stuttgarter-nachrichten.de/inhalt.deutschland-bericht-weniger-wachstum-wegen-fachkraeftemangel.ecc6fe48-d93d-4910-819d-dd1cd81d6b77.html

Oddly, where Germany has really not been growing, compared to the U.S., is in its budget deficit - 2018 will be the 4th year in a row where the Bundesregierung will not increase its deficit. And in 2019, due to paying off outstanding debt, Germany will finally return to meeting the terms of eurozone stability pact, with a total debt of 58% of GDP.

"with each of the major economies experiencing a sharp decline in growth"

I'll show you a sharp decline in growth:

https://cleantechnica.com/2018/04/15/its-the-gulf-stream-stupid-climate-scientists-warn-tipping-point-is-near/

Here's my two pence: punch bowl is being taken away AND US tax cuts just aren't increasing demand.

When you say "punch bowl", you're referring to the out of control 1% inflation I presume?

https://www.ft.com/content/58c4ed56-1c6b-11e8-aaca-4574d7dabfb6

The problem is monetary. Own goal in the making.

Just read somewhere and now paraphrase: turning on the presses increases prices but reduces money's worthiness

Fruits of socialism.

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