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The Ifo indicator of German business confidence is expected to reverse its six-month decline with a slight increase in March thanks to stronger expectations about the next half year. The Ifo Institute is scheduled to announce the results of its latest survey of business managers at 0900 GMT on 25 March.
Economists predict that this month’s Ifo headline business climate index will tick up to 98.6 from 98.5 in February. The current situation indicator is seen slipping to 103.0 from 103.4, and the expectations component is forecast at 94.3 versus 93.8.
More optimism about the future was also expected last month, when business expectations “deteriorated sharply and turned pessimistic for the first time since December 2012,” Ifo said. (LiveSquawk – Continue Reading)
A rule designed by former Governing Council member Athanasios Orphanides -- praised by researchers at the ECB just after the end of quantitative easing was announced -- says policy is now too tight, after months of weak economic data forced the central bank to lower its inflation outlook.
The central bank predicts that price growth will average 1.5 percent in 2020 and 1.6 percent the following year, below the medium-term goal of below, but close to, 2 percent.
“If the ECB had an inflation target between 1 percent and 1.5 percent, then their policy would be fine,” Orphanides said in a phone interview. “The rule is objectively suggesting what the ECB should do if it could act an independent institution -- right now the rule says they should ease policy.” (Bloomberg – Continue Reading)
US officials are downplaying the prospect of an imminent trade deal with China as President Donald Trump’s top negotiators prepare to head to Beijing for a fresh round of talks next week, according to people familiar with the matter.
Trump has said that he wants an agreement that could be enforced, not a quick deal. U.S. Trade Representative Robert Lighthizer, who is leading the talks for Trump, and Treasury Secretary Steven Mnuchin will travel to Beijing for meetings at the end of next week, and Chinese Vice Premier Liu He will then come to Washington in April to continue the discussions, the Chinese Ministry of Commerce said on Thursday.
The two sides have continued negotiations on a 150-page agreement through telephone calls and video conferencing, including one held late Wednesday, said the people, who asked for anonymity because they were not authorized to speak to the press. They added that while there had been progress, negotiators wanted to meet face to face. (Bloomberg – Continue Reading)
There are reports that prime minister Theresa May will attempt to bring her deal back to parliament next week for a third meaningful vote. This relies on her finding a satisfactory way to duck Speaker John Bercow’s requirement for a “substantial change”, and even then, the odds still appear stacked against the prime minister's deal.
But if PM May does find a way of getting a deal through, then talk of a near-term rate hike could quickly return. Wage growth is running at a post-crisis high and given that this stems from skill shortages in various parts of the economy, we don’t expect this trend to reverse rapidly. The Bank’s forecast of excess demand at the tail-end of its forecast period implies that more tightening could be needed than currently priced into markets. (ING Think – Continue Reading)
The composite PMI for the eurozone declined from 51.9 to 51.3 in March, which gives little hope of growth recovery in the first quarter. Businesses continue to indicate that new orders have weakened, which mainly stems from export orders declining at a worrying pace. Factors such as the trade conflict between the US and China, possible tariffs on the auto sector and Brexit impact global growth and weigh on new orders coming in. Employment growth slowed on the back of this as businesses see output grow at a weaker pace.
The decline in the German PMI is worrisome as it indicates that the bottom has not yet been found. While services are holding up nicely, the manufacturing downturn is deepening, according to the German manufacturing PMI. While recovery from one-offs is still expected in German manufacturing output, uncertainty about global economic factors is weighing heavily on the Eurozone’s largest economy. (ING Think – Continue Reading)
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