Europe heading into recession

[DeejRC]

It’s too pessimistic, numbers, inherent systemic process and sterile driven Stongle.
Everything is downside orientated and that isn’t a balanced or even realistic equation.
And we both know that, so I will of course allow you half a pint for hyperbole and throwing peanuts to the current audience.

Now then - hands up all those who saw Deej waving the optimism flag eh? 😂

[stongle]

DeejRC said:

It’s too pessimistic, numbers, inherent systemic process and sterile driven Stongle.
Everything is downside orientated and that isn’t a balanced or even realistic equation.
And we both know that, so I will of course allow you half a pint for hyperbole and throwing peanuts to the current audience.

Now then - hands up all those who saw Deej waving the optimism flag eh? ??

Oooh. Harsh. Of course some of it plays to forum brevity, however - they are going to have to do an extraordinary intervention. On top of everything Draghi's done thus far. I'd love someone to throw a counter scenario in, but I'm too biased or stupid to think it up. I can only think the saviour is political - and that has to be the worst idea possible.

I fully admit to being on the glass half empty side, but if 1 or 2 issues hit at once (like recently in the US repo market) - the Eurozone doesnt need much more to go in the stter. They can't keep dodging bullets.

But if yoy are calling me out, give me the middle case? I was already castigated on MMT.

[stongle]

Some more musings.....

EC has confirmed it lettered: France, Spain, Portugal, Italy and Belgium; re the 2020 budgets that will breach EC structural rules. Whether this will escalate into the same issues Italy has (and caused their political issues this year) - will be played out over the next few weeks.

These are the countries with the highest debt load in the EU; and France's response to the yellowvests is attracting special attention.

Another interesting or worrying statistic, is that in the last 8 years (under Draghi); Eurozone inflation has averaged 1.2%. Way below target (and not helpful for debt load). Despite massive job creation in the EU & wage inflation; they have very poor underlying core inflation. Normal Monetary Policy thinking doesn't work. It's like the Eurozone is the Bermuda triangle for Keynesian economics - Monetary stimulus doesn't work; can't do fiscal.

My view on why its inflation target is missing is 2 fold: 1) Globalised economy is too big, much bigger influence than thought 2) the Eurozone project (and ECB mandate) didn't sort the fact pattern of the zone / divergent economies. They made a lot of assumption's on debt loads, economic velocity and convergence etc - that are not coming to fruition.

Oh, and bank lending is slowing down, despite the bazookas and kitchen sinks – no more zombies to fund?

In other words, they screwed the pooch or fked it.

Or did they (for DeejRC)?

Created 11m jobs and more countries want to join….

I think we all know there is NO end of the EURO – but what is the next Houdini like trick the ECB will pull out the hat? I think Lagarde will change mandate, but I can’t figure out what that will be. I suspect, more can kicking, possible helicopters or unobtanium.

Given the fundamentals are a bit shaky, they need as many FTAs as possible. It’s pointless sticking that in “the other thread” given the stupidity and name calling – but they look open for business. Personally, I don’t see Team UK as a good fit for Europe; we are more globalised and the economy is not the same (we have a demonstrated better response to stimulus measures and generally follow the Fed in that respect). I also have a bit of a distaste for constant treaty abuses the EU countries engage and the downside risks (France), but I’m a bit British about the rules (unless the gloves are off). Norway+ looks a good option, in the scheme of things it’s peanuts for access and we don’t get rodded in the WTO, when Trump starts dropping rods from god all over their manufacturing base.

Killing off BREXIT uncertainty IS as critical for them as it is for us. Global business investment growth has tanked since 2017 (down from 4.4% to 1.5%), we have to get of the launch pad. We have appalling infrastructure spend numbers, construction pace is slowing – but it’s all uncertainty based. We have a £600bn (that’s an uptick of 7% on the UK property market), construction pipeline planned, there’s 23bn going looking for high value digital infrastructure spend – but need to get over this frikking hurdle to start the process.

So, has anyone else got any cheery thoughts or ideas to fix the current mess?

[Digga]

stongle said:

Killing off BREXIT uncertainty IS as critical for them as it is for us. Global business investment growth has tanked since 2017 (down from 4.4% to 1.5%), we have to get of the launch pad. We have appalling infrastructure spend numbers, construction pace is slowing – but it’s all uncertainty based. We have a £600bn (that’s an uptick of 7% on the UK property market), construction pipeline planned, there’s 23bn going looking for high value digital infrastructure spend – but need to get over this frikking hurdle to start the process.

So, has anyone else got any cheery thoughts or ideas to fix the current mess?

^This bit, is huge. The 'parked' money in the UK must now be considerable. No doubt, for the rEU, Brexit uncertainty is having similar, if less pronounced effect. Swift resolution is key.

[anonymous-user]

One of the likely drivers of a lack of inflation in the Eurozone is the move of the productive workload to the east and its lower base wage level economy, this has meant that the normal link where productivity growth increases wages has been broken, the west has stagnated or even seen negative wage growth. Unlike the UK, people in countries like Germany don't like taking on debt to bridge this gap of lack of wage growth, so they wont spend, which keeps prices down.

[Vanden Saab]

Digga said:

This bit, is huge. The 'parked' money in the UK must now be considerable. No doubt, for the rEU, Brexit uncertainty is having similar, if less pronounced effect. Swift resolution is key.

If there are billions of £s just waiting to be spent how does this tie in with the predictions of recession when we leave?

[Digga]

Vanden Saab said:

Digga said:

This bit, is huge. The 'parked' money in the UK must now be considerable. No doubt, for the rEU, Brexit uncertainty is having similar, if less pronounced effect. Swift resolution is key.

If there are billions of £s just waiting to be spent how does this tie in with the predictions of recession when we leave?

Recession could still be the outcome post Brexit, but what is certain is a large number of projects - business, government and private domestic - are awaiting 'a definitive Brexit decision' of some sort. We may move from the current uncertainty into the next uncertainty. It could take some time before those in control see fit to decide how to allocate their capital. However, IMHO recession is guaranteed without any progress this month.

[Earthdweller]

Up to 500 jobs lost as Shannon-based Molex to close

US multinational pulls out of Ireland

https://www.rte.ie/news/2019/1022/1084921-molex-sh...

[Earthdweller]

Earthdweller said:

Up to 500 jobs lost as Shannon-based Molex to close

US multinational pulls out of Ireland

https://www.rte.ie/news/2019/1022/1084921-molex-sh...

Another multinational announced pulling out of Ireland this morning with 300 jobs going in Cork

Coincidence or ?

[Digga]

Well the Telegraph reckons delayed Brexit is cosing £525m per week in lost UK GDP...

https://www.telegraph.co.uk/business/2019/10/17/ec...

It cannot be helping in other countries.

[jimKRFC]

Earthdweller said:

Another multinational announced pulling out of Ireland this morning with 300 jobs going in Cork

Coincidence or ?

Do you mean Novartis? I heard that a total of 320 jobs are to go at Novartis in Co Cork as it closes one of its production buildings by mid-2022.

Also, there will also be a relocation of a number of global services roles located at Ringaskiddy by the end of 2021 to operations centres in Europe and Asia. Given they'll shift the support roles at Ringaskiddy (business support, administration, production planning and testing) then it'll be more like 550 jobs at two facilities

Edited by jimKRFC on Wednesday 23 October 11:04

[Digga]

In figures out this morning, French manufacturing outlook tanking:

https://notayesmanseconomics.wordpress.com/2019/10...

the article said:

If we look back at this series we see that it peaked at 113,5 back in February 2018 and is now at 99.4 so quite a decline which has now moved it below its long-term average, This matters as it is a long-running series and of course 100 for manufacturing means relative decline.

Edited by Digga on Wednesday 23 October 10:57

[NRS]

Vanden Saab said:

Digga said:

This bit, is huge. The 'parked' money in the UK must now be considerable. No doubt, for the rEU, Brexit uncertainty is having similar, if less pronounced effect. Swift resolution is key.

If there are billions of £s just waiting to be spent how does this tie in with the predictions of recession when we leave?

Alternative to the other explanations is people predicting are just wrong too. Either through confirmation bias, wrong models, or plain greed. Look at Trump's election - he was going to destroy things and the market would crash if elected. Yet after a 1/2 a day "crash" then the stock market went on a rapid run up for a while after.

[Digga]

NRS said:

Vanden Saab said:

Digga said:

This bit, is huge. The 'parked' money in the UK must now be considerable. No doubt, for the rEU, Brexit uncertainty is having similar, if less pronounced effect. Swift resolution is key.

If there are billions of £s just waiting to be spent how does this tie in with the predictions of recession when we leave?

Alternative to the other explanations is people predicting are just wrong too. Either through confirmation bias, wrong models, or plain greed. Look at Trump's election - he was going to destroy things and the market would crash if elected. Yet after a 1/2 a day "crash" then the stock market went on a rapid run up for a while after.

Neither Leave nor Remain seem to want to talk about the costs to the UK of kicking the Brexit can down the road, but they are definitely there.

[NRS]

It wouldn't matter anyway. It'd just turn into new thing to selectively pick the "facts" on, depending who you support.

[stongle]

German PMI for Oct comes in @ 51.2 Forcast is 52. Quite an undershoot. Evidently employment in Industry has slumped (but no number yet so treating as anecodotal) - HOWEVER, if there is a reduction (and this spreads) - it's playing into the IMG's growth caveat for Global GDP increase *basically growth is powered by employment and wage inflation).

France out performed, but looks like ywllovest type stimulus.

Interesting times.

[anonymous-user]

stongle said:

German PMI for Oct comes in @ 51.2 Forcast is 52. Quite an undershoot. Evidently employment in Industry has slumped (but no number yet so treating as anecodotal) - HOWEVER, if there is a reduction (and this spreads) - it's playing into the IMG's growth caveat for Global GDP increase *basically growth is powered by employment and wage inflation).

France out performed, but looks like ywllovest type stimulus.

Interesting times.

That's service sector PMI, the more important for Germany manufacturing sector PMI is 41.9. That's seriously bad!

[stongle]

jsf said:

That's service sector PMI, the more important for Germany manufacturing sector PMI is 41.9. That's seriously bad!

Apols, yes missed that!

Sept inflation was 0.8%. Draghi's is on in a bit? Hold @ -0.5%?

[amusingduck]

jsf said:

stongle said:

German PMI for Oct comes in @ 51.2 Forcast is 52. Quite an undershoot. Evidently employment in Industry has slumped (but no number yet so treating as anecodotal) - HOWEVER, if there is a reduction (and this spreads) - it's playing into the IMG's growth caveat for Global GDP increase *basically growth is powered by employment and wage inflation).

France out performed, but looks like ywllovest type stimulus.

Interesting times.

That's service sector PMI, the more important for Germany manufacturing sector PMI is 41.9. That's seriously bad!

Holy st!

Isn't a PMI score of 50 effectively "no change"?

[isaldiri]

Hardly a surprise is it? US manufacturing ISM has went below 50 and the non manufacturing number had a big miss last time. Poor german pmi is neither here nor there in holding up hope for the imminent collapse of the EZ...