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Trends
FINANCIAL CONDITIONS
IN THE EURO AREA
In the three-month period from July to September 2008 short-term interest rates rose. The three-month EURIBOR rate increased from an average 4.96% in July to 5.02% in September. Yet, the ten-year bond yields
decreased from 4.81% in July to 4.11% in September. In the same period of time the yield spread also fell from – 0.15% (July) to – 0.91%
(September).
The German stock index DAX declined in September 2008, averaging
5,831 points compared to 6,480 points in July and 6,422 points in
August. The Euro STOXX also fell from 3,299 in July to 3,194 in
September. The Dow Jones International also declined, averaging
11,114 points in September compared to 11,322 points in July and
11,531 points in August.
The annual rate of growth of M3 decreased to 8.8% in August 2008, from
9.1% in July. The three-month average of the annual growth rate of M3
over the period from June to August 2008 declined to 9.2%, from 9.6% in
the period May to July 2008.
In July 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 3/2008
Trends
EU
SURVEY RESULTS
According to the first Eurostat estimates, euro area (EU15) GDP
declined by 0.2% and EU27 GDP also by 0.1% 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 0.6% in the
EU27.
In September 2008, the EU Economic Sentiment Indicator (ESI) fell by
1.5 points in the EU27 and decreased by 0.8 points in the euro area, to
85.2 and 87.7 respectively. In the EU27, the ESI reached its lowest level
since December 1993, while for the euro area it approached its 2001
trough. Overall economic confidence improved in Italy and France
(+ 0.5 both), while drops were registered in the Netherlands (– 5.2), the
UK (– 4.2), Spain (– 1.4), Germany (– 1.3) and Poland (– 1.2).
* 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 – 12.5 in July to
– 20.6 in September 2008. In June the indicator had reached – 7.9.
Capacity utilisation declined to 82.7 in the third quarter of 2008 from 83.6
in the previous quarter.
In September 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 September consumer confidence in both areas remained
unchanged, after a rebound in August. Also the consumer confidence
indicator currently stands below its long-term average in both areas.
CESifo Forum 3/2008
36
Trends
EURO AREA
INDICATORS
The Ifo indicator of the economic climate in the euro area (EU15) has
worsened again in the third quarter of 2008 for the fourth 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 1.44 $/€ in
September 2008, a decrease from 1.58 $/€ in July. (In June the rate had
amounted to 1.56 $/€.)
Euro area (EU15) unemployment (seasonally adjusted) amounted to
7.5% in August 2008, compared to 7.4% in July. EU27 unemployment
stood at 6.9% in August 2008, unchanged from July. This is a decrease
from the 7.1% of a year earlier. Among the EU Member States the lowest rates were registered in the Netherlands (2.6%) and Denmark (2.9%
in July 2008). Unemployment rates were highest in Spain (11.3%) and
Slovakia (9.9%).
Euro area annual inflation (HICP) was 3.8% in August 2008, down from
4.0% in July. This is quite an increase from a year earlier, when the rate
had been 1.7%. The EU27 annual inflation rate reached 4.2% in August.
A year earlier the rate had amounted to 1.9%. An EU-wide HICP comparison shows that in August 2008 the lowest annual rates were observed
in the Netherlands (3.0%), Portugal (3.1%) and Ireland (3.2%), and the
highest rates in Latvia (15.6%), Lithuania (12.2%) and Bulgaria (11.8).
Year-on-year EU15 core inflation (excluding energy and unprocessed
foods) rose to 2.6% in August, from 2.5% in July.
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CESifo Forum 3/2008