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ifo Economic Climate for the Euro Area Falls

Summary:
Advance results of the ifo World Economic Survey (WES) of 3rd quarter 2018 Press Release (PDF, 188 KB) Sentiment in the euro area weakened this quarter. The ifo Economic Climate for the euro area fell from 31.1 balance points last quarter to 19.6 balance points. Although experts’ assessments of the current economic situation only deteriorated slightly, their economic expectations clouded over significantly, dropping to their lowest level since the end of 2012. This signals an economic slowdown in the euro area. The economic climate deteriorated in the euro area’s five biggest economies, albeit to varying degrees. In Germany, Italy and The Netherlands experts significantly scaled back their economic

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Advance results of the ifo World Economic Survey (WES) of 3rd quarter 2018

Sentiment in the euro area weakened this quarter. The ifo Economic Climate for the euro area fell from 31.1 balance points last quarter to 19.6 balance points. Although experts’ assessments of the current economic situation only deteriorated slightly, their economic expectations clouded over significantly, dropping to their lowest level since the end of 2012. This signals an economic slowdown in the euro area.

The economic climate deteriorated in the euro area’s five biggest economies, albeit to varying degrees. In Germany, Italy and The Netherlands experts significantly scaled back their economic expectations. The indicator for the current economic situation also fell in these three countries. Despite this decline, assessments of the current economic situation in Germany and the Netherlands remain very good. The current economic situation indicator also remains positive in France and Spain, but is negative in Italy.

While WES experts expect the dynamic in private consumption to continue to lose impetus in the euro area, they also expect investment to stagnate for the first time since the end of 2012. The current debate over tariffs and protectionism led to a clear deterioration in export expectations. WES experts now forecast an annual inflation rate of 1.7 percent for 2018, versus 1.6 percent last year. The supply of credit via the banking system is improving gradually.

Clemens Fuest
Clemens Fuest took over from Hans Werner Sinn as chairman of the IFO Institute in April 2016. He is professor at the Faculty of Economics of the University of Munich.

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