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In the absence of any ECB interest rate cuts, short-term interest rates
have remained flat, declining only marginally in January and February
2004 to average 2.07 in the latter month. Long-term rates, which peaked
at 4.4% in November, declined to 4.2% in February. Accordingly, the
yield spread narrowed from 2.3% to 2.1% over the same period.
Stock prices continued their upward trend through February 2004, but
sharply declined in March. On March 27, the Euro STOXX closed at
2763, the DAX at 3822 and the Dow Jones Industrial at 10212.
The annual rate of growth of M3 declined to 6.3% in February 2004,
from 6.5% in January, thereby continuing the downward trend that
began in the summer months of 2003. The three-month average of the
annual growth rates of M3 over the period December 2003 to February
2004 decreased to 6.6% from 7% in the period November 2003 to
January 2004. The ECB suspects that euro area investors are gradually
shifting their portfolios toward longer-term and riskier financial assets
outside M3.
This indicator of monetary conditions in the euro area (3-month moving
average) continued to decline in January, albeit less than before. It thus
reflected slightly less monetary easing. Both underlying statistics, the
real short-term interest rate and the real effective exchange rate of the
euro rose during the three-month period under consideration.
CESifo Forum 1/2004
According to first estimates for the fourth quarter of 2003, euro-zone
GDP grew by 0.3% and EU15 GDP grew by 0.4% compared to the previous quarter. Compared to the fourth quarter of 2002, GDP grew by
0.6% in the euro-zone and by 0.9% in EU15, after 0.3% and 0.6% respectively in the previous quarter. Investment rose faster than private consumption and imports faster than exports.
Following its nearly continuous increase since summer 2003, the
Economic Sentiment Indicator in the EU stabilised in February at a
level of 96.7. A small decrease in confidence in the construction sector
was offset by an equally small increase in consumer confidence. The
biggest improvement, by 0.6 percentage points, was registered by
Denmark, the biggest deterioration, by 0.5 points, by Ireland. Among the
larger Member States, economic sentiment saw an improvement in
Germany and Spain, whereas in France and Italy the indicator worsened. It remained unchanged in the UK.
* The industrial confidence indicator is an average of responses (balances) to the
questions on production expectations, order-books and stocks (the latter with
inverted sign).
** New consumer confidence indicators, calculated as an arithmetic average of the
following questions: financial and general economic situation (over the next
12 months), unemployment expectations (over the next 12 months) and savings
(over the next 12 months). Seasonally adjusted data.
As mentioned, EU order books declined against the previous month. The
deterioration was most pronounced for France, Ireland and Austria.
Denmark, Italy, Finland and the UK showed an improvement. Capacity
utilisation fell again, to 80.6 in the first quarter of 2004 from 80.8 in the
previous quarter.
The industrial confidence indicator moved sideways at -6, a value representing a three year high. Among the components, production expectations remained unchanged, whereas order books and the stock of finished
products worsened slightly compared to January. The consumer confidence indicator continued its upward trend that started a year ago,
increasing by one point. The indicator improved by 7 points in the
Netherlands and by 3 points in Germany.
CESifo Forum 1/2004
In Jnauary, the quarterly Ifo indicator for the economic climate in the
euro area rose for the fifth time in succession. The assessments of the current economic situation improved even more than the already quite optimistic expectations for the next six months. In spite of the more
favourable appraisals, the current economic situation is still far away from
a satisfactory level. Within the euro area, the economic climate was considered most favourable in Finland, Ireland, Belgium, Spain, Greece, and
Austria. In the Netherlands, Portugal, Italy, Germany, and France, the climate index lay below the euro-area average.
The euro continued to appreciate against the dollar in February, averaging $1.2646. It declined, however, during the month of March, approaching its level of December 2003.
In January, the euro-area (seasonally adjusted) unemployment rate stood
at 8.8%, unchanged from December 2003. It had been 8.7% in January
2003. The lowest rates were registered in Luxembourg (3.9%), the
Netherlands (4.3% in December 2003), Austria (4.5%) and Ireland
(4.6%). Spain’s rate, at 11.2%, remained the highest, topping Finland’s
(9.0%), Germany’s (9.2%), and France’s (9.5%).
Euro-area annual inflation fell from 1.9% in January to 1.6% in February
2004. It had stood at 2.4% a year earlier. Compared with January 2004,
annual inflation fell in twelve Member States and rose in three (Italy,
Luxembourg and Austria). Core inflation (adjusted for unprocessed
foods and energy) rose from 1.9% in January to 2.1% in February.
CESifo Forum 1/2004