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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Jul 11 2016

Assessing Eurozone Economic Outlook

Before the Brexit shock, the consensus view of Eurozone economic growth prospects had been favorable. European Central Bank president Mario Draghi expected “the economic recovery to proceed at a moderate but steady pace.” Yet, from a cyclical perspective, even before the U.K. referendum Eurozone growth had clearly begun to slow.

Indeed, year-over-year Eurozone GDP growth – a smoother and more revealing metric than the quarter-on-quarter measure – is at a one-year low, due in part to the ongoing and considerable headwinds from slower global growth and weak exports. The growth slowdown is evident in our Eurozone Coincident Index Growth Diffusion Index (EZCIGDI, Chart), which measures the proportion of the Eurozone economies regularly monitored by ECRI whose coincident index growth rates have improved over a 12-month span. Despite the EZCIGDI edging up in April, it remains near March’s 16-month low and in a cyclical downturn.



Our latest report features the corresponding Eurozone Long Leading Index Growth Diffusion Index, which measures the proportion of the Eurozone economies regularly monitored by ECRI whose long leading index growth rates have improved over a 12-month span, and provides insight into whether Eurozone growth will revive in the months ahead or continue to weaken.

Related News & Events

Cyclical Misconceptions Driving Policy Errors

ECRI June 30, 2016

Policies rooted in overly optimistic assumptions about trend growth and mistaken notions about business cycle dynamics are key to the “productivity puzzle.” More

 

A Sober Economy Can Handle the Brexit Hit

Bloomberg June 30, 2016

One of the main signs of the health of the global and U.S. economies is its ability to absorb a blow, and shake it off. More

 

Weak Business Investment No Surprise, Preceded Brexit

ECRI June 29, 2016

The Fed, counting on investment growth to bolster the economy, has been disappointed, undercutting any “rate hike cycle” plans. More

 

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