Euro zone: towards a further deterioration of the economic situation?

The latest eurozone data indicate a weakening economy with PMI readings now at levels reflecting a slight growth contraction. The downturn has not yet led to a rise in the unemployment rate, which remains at a low of 6.6%. That said, we are beginning to see a labour market shift in countries that release timely figures, and especially in Germany.

While economic weakening currently remains modest, signs of a downturn are accumulating and the effects of the energy crisis have probably yet to be fully felt, softened by the support from governments. Despite stubbornly high inflation, further economic weakening could persuade the ECB to pause its rate hike process at the end of 2022 following two further and possibly significant increases (50–75 bps). Such a pause would leave time to assess the impact of the ECB’s action. As things stand, the market is currently pricing in 100 bps of additional rate hikes for the first half of 2023.

* PMI: Purchasing Managers Index. PMIs are confidence indicators which summarize the results of surveys of corporate purchasing managers. A value below 50 indicates negative sentiment.

The opinion expressed above is dated October 14th, 2022 and is subject to change.

See also: https://latribune.lazardfreresgestion.fr/en/bond-markets-carry-makes-a-return/

***

This document is not pre-contractual or contractual in nature. It is provided for information purposes. The analyses and descriptions contained in this document shall not be interpreted as being advice or recommendations on the part of Lazard Frères Gestion SAS. This document does not constitute an offer or invitation to purchase or sell, nor an encouragement to invest. This document is the intellectual property of Lazard Frères Gestion SAS. LAZARD FRERES GESTION – a simplified joint stock company with share capital of €14,487,500 – Paris Trade and Companies Registry No. 352 213 599. 25, RUE DE COURCELLES – 75008 PARIS, FRANCE

Prev
What a Strong U.S. Dollar Means for Investors
Next
Sustainable investment: could regulations be the solution to greenwashing?
Une fleur pousse au milieu du béton pour symboliser l'ESG

Sustainable investment: could regulations be the solution to greenwashing?