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Trends
FINANCIAL CONDITIONS
IN THE EURO AREA
In the three-month period from August to October 2008 short-term
interest rates rose. The three-month EURIBOR rate increased from an
average 4.97% in August to 5.11% in October. Yet, the ten-year bond
yields decreased from 4.50% in August to 4.42% in October. In the same
period of time the yield spread also fell from – 0.47% (August) to
– 0.69% (September).
The German stock index DAX declined in October 2008, averaging
4,988 points compared to 6,422 points in August and 5,831 points in
September. The Euro STOXX also fell from 3,346 in August to
2,672 in October. The Dow Jones International also declined, averaging 9,177 points in October compared to 11,531 points in August and
11,114 points in September.
The annual rate of growth of M3 decreased to 8.6% in September 2008,
from 8.8% in August. The three-month average of the annual growth rate
of M3 over the period from July to September 2008 declined to 8.9%, from
9.2% in the period June to August 2008.
In August 2008 the monetary conditions index continued its general
decline that had started in late 2001, signalling greater monetary tightening. This is the result of rising real short-term interest rates and a rising real effective exchange rate of the euro.
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CESifo Forum 4/2008
Trends
EU
SURVEY RESULTS
According to the second Eurostat estimates, euro area (EU15) GDP
declined by 0.2% and EU27 GDP remained unchanged in the second
quarter of 2008, compared to the previous quarter. In the first quarter of
2008 the growth rate had amounted to + 0.7% for the euro area and
+ 0.6% for the EU27. Compared to the second quarter of 2007, i.e. year
over year, seasonally adjusted GDP rose by 1.4% in the euro area and by
1.7% in the EU27.
In October 2008, the EU Economic Sentiment Indicator (ESI) fell by
7.4 points in the EU27 and decreased by 7.1 points in the euro area, to
77.5 and 80.4 respectively. In both regions, the ESI recorded its largest
month-on-month decline ever to hit its lowest level since 1993. All countries reported a fall in their ESI. Confidence deteriorated most markedly in the Netherlands (– 11.3), followed by France (– 6.5), Italy (– 6.1),
the UK (– 5.7), Poland (– 5.1), Germany (– 4.8) and Spain (– 3.5).
* 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.
Managers’ assessment of order books deteriorated from – 13.5 in August
to – 26.8 in October 2008. In July the indicator had reached – 12.5.
Capacity utilisation declined to 80.9 in the fourth quarter of 2008 from
82.8 in the previous quarter.
In October 2008, the industrial confidence indicator fell in both the EU27
and the euro area. The decline was more marked in the EU27 than in the
euro area. The indicator has been on a downward path since its peak in
May 2007 and currently stands below its long-term average in both areas.
In parallel the consumer confidence indicator also saw a sharp downward
correction in October and currently stands below its long-term average in
both areas.
CESifo Forum 4/2008
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Trends
EURO AREA
INDICATORS
The Ifo indicator of the economic climate in the euro area (EU15) has
worsened again in the fourth quarter of 2008 for the fifth time in succession, falling to its lowest level in five years. Its decline is the sole result of
less positive assessments of the current economic situation as well as
clearly more pessimistic expectations for the coming six months.
The exchange rate of the euro against the US dollar averaged 1.33 $/€ in
October 2008, a decrease from 1.44 $/€ in September. (In August the rate
had amounted to 1.50 $/€.)
Euro area (EU15) unemployment (seasonally adjusted) amounted to
7.5% in September 2008, unchanged from August. It was 7.3% in September 2007. EU27 unemployment stood at 7.0% in September 2008,
compared to 6.9% in August. The rate was also 7.0% in September 2007.
Among the EU Member States the lowest rates were registered in the
Netherlands (2.5%) and Denmark (2.9%). Unemployment rates were
highest in Spain (11.9%) and Slovakia (10.0%).
Euro area annual inflation (HICP) was 3.2% in October 2008, compared
to 3.6% in September. This is quite an increase from a year earlier, when
the rate had been 2.6%. The EU27 annual inflation rate reached 4.2% in
September, down from 4.3% in August. A year earlier the rate had
amounted to 2.2%. An EU-wide HICP comparison shows that in September 2008 the lowest annual rates were observed in the Netherlands
(2.8%), Germany (3.0%), Ireland and Portugal (both 3.2%), and the
highest rates in Latvia (14.7%), Bulgaria (11.4%) and Lithuania
(11.3%). Year-on-year EU15 core inflation (excluding energy and
unprocessed foods) fell to 2.5% in September from 2.6% in August.
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CESifo Forum 4/2008