Eurozone Gradual Economic Recovery European Central Bank President Mario Draghi said that Eurozone's gradual economic slowdown is normal and temporary to some extent. Underlying inflation is expected to rise in the coming months, making policymakers confident that the massive asset purchase program could be ended in December. He also acknowledged that economic data since September have been somewhat weaker than expected and that the loss in growth momentum mainly reflected weaker trade growth. Eurozone growth halved to 0.2 percent in the third quarter.He reiterated that risks relating to protectionism, vulnerabilities in emerging markets and financial market volatility remain prominent.The ECB Chief also views the underlying strength of domestic demand and wages continue to support the bank's confidence and that the sustained convergence of inflation to its aim of "below, but close to 2 percent" will proceed. However he added that at the same time, “prevailing uncertainties still call for patience, prudence and persistence in calibrating our monetary policy stance".
Eurozone sentiment falls for the 11th month in a row The montly Economic Sentiment Indicator for the Eurozone dropped from 109.7 in October to 109.5 in November, as industrial sentiment improved for the first time since April. Service sector sentiment stabilized in November, after a large drop in October. The latest industrial sentiment revealed a slightly brighter picture of the manufacturing environment than in October. The concerning drop in the export orders' indicator and the very modest pickup in total new orders after a large decline in October indicate there remains enough to worry about for Eurozone industry in the winter months. A bounce back seemed in the making as growth was hindered by one-off factors like hiccups in German car production, but it looks like the recovery from recent weakness will be spread out over a few quarters. Growth expectations are therefore modest for Q4 and the coming quarters. GDP growth for Q4 is generally forcasted at just 0.3% QoQ and the annual growth for 2018 at 1.9%.
A report from the UK’s National Institute of Economic and Social Research (NIESR) warned that Brexit has hit the UK economy hard and the impact would be greater in the long run if the proposed deal is implemented. NIESR said that if the “proposed Brexit deal is implemented, then GDP in the longer term will be around 4 percent lower than it would have been had the UK stayed in the EU". The NIESR expects the uncertainty about the precise shape of the future relationship to continue beyond the transition period ending on December 31, 2020. It also reported the the "Recent estimates, based on the UK's performance relative to other similar economies, suggest that Brexit uncertainty has already reduced UK GDP by about 2 per cent relative to what it would have been if the UK had stayed in the EU".