EMU economic indicators

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M3 growth probably slowed down to 10.3% yoy in March

Tue, Apr 22 2008, 11:12 GMT
by BHF-Bank Economics Department

BHF-Bank


  • The German ifo business climate is expected to have deteriorated in April

  • The April RBS PMI manufacturing indices for Germany and the EMU could have fallen

M3 has been growing at a more leisurely pace for several months now. After having peaked at 12.4% in November, the annual growth rate fell to 11.3% in February, and is likely to have slipped by a further percentage point to 10.3% in March. The narrow monetary aggregate M1, which consists of cash and overnight deposits, is only likely to have risen by 2.6% yoy. However, as banks are extremely keen to attract deposits, and the flat yield curve is offering investors little incentive for longer term investments, short term deposits are continuing to rise significantly. Therefore, overall M3 growth is only slowing gradually. Credit growth (MFI loans to domestic private non-financial sectors) is likely to have slowed down further from 10.9 to 10.4% yoy.

In April, the German ifo business climate index is likely to have deteriorated. The US ISM manufacturing index rose slightly in March, but the German ZEW economic sentiment has dropped in April. As a result of the increase in short and long-term interest rates, the German yield spread has improved, but not enough to compensate for its drop in the first half of March. The same applies to the DAX performance index. Furthermore, the crude oil price has continued to rise and the euro has appreciated. Thus the RBS purchasing managers’ index for the German and for the EMU manufacturing sector might both have deteriorated in April.

We are expecting Belgian business confidence to have remained more or less unchanged, but French business confidence could have suffered a setback in April, after having soared in March. Due to the unfavourable economic environment, Italian business confidence is likely to have continued deteriorating and Italian consumer confidence will probably only have stabilized in April. However, the results of the general election might have had a positive impact on both Italian business and consumer confidence.

French consumer spending is likely to have fallen in March, because French consumer confidence deteriorated. In February, EMU industrial new orders are only expected to have stabilized, after having soared in January. The EMU current account is likely to have rebounded in February, following its usual seasonal pattern and the trade balance.

Published on  Tue, Apr 22 2008, 11:18 GMT

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