Research Team at BBH, notes that many discussions talk about the state of the Eurozone economy as if it were Japan, struggling to sustain positive growth.
“The eurozone growth was 1.6% last year after 1.0% in 2014 and 0.6% in 2013. While measures of trend growth vary, the 1.6% pace is probably not far from it.
The flash manufacturing PMI rose to 51.4 from 51.2. The risk of the final report seems to be on the downside as we think about the political stalemate in Spain and the push back against Renzi's reforms in Italy. The manufacturing PMI averaged 52.8 in Q4 15. Based on the flash, it had slipped to 51.6 in Q1 16.
News that the flash Eurozone February CPI fell to minus 0.2% from 0.4% may have encouraged the sense of the ECB's urgency. The consensus expects a small upward revision to minus 0.1%. The point, however, is that there is not a serious risk of sustained deflation in the euro area. Core prices are expected to be revised to 0.9% from 0.8%. They have been remarkably steady at 0.9%. It is the three, six, and 12-month average.
We note that money supply (M3) growth has also been extremely steady at 4.9%-5.0% over the same period. The February money supply and lending report will be released on March 29. Lending remains only slightly positive.”
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