InvestNow News 30th Aug – AMP Capital – The outlook for the Eurozone and ECB

29th Aug – Diana Mousina – Economist – Investment Strategy & Dynamic Markets Sydney Australia

In this economic update Diana Mousina, Senior Economist, AMP Capital Australia, takes a look at the outlook for the Eurozone and ECB, including political risks, manufacturing slump and negative interest rates.

The weakness in the Eurozone economy in the second half of 2018 was expected to be transitory, and a recovery in GDP growth evident in the second half of 2019. So far, there are few signs of this recovery occurring:

  • Germany is struggling from a weak manufacturing sector, particularly via the negative impacts of the US/China trade dispute.
  • Political risks around the collapse of the Italian government and Brexit uncertainty will also weigh on Eurozone growth.
  • There are limits to what the ECB can do to stimulate growth. But expect more stimulus to be announced at the September meeting. We expect a cut to the deposit rate, another round of quantitative easing and dovish forward guidance.
  • Fiscal policy should be utilised in countries with capacity to lift public spending, like Germany.

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