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ifo Economic Climate for the Euro Area Grows Harsher

Summary:
Advance results of the ifo World Economic Survey (WES) of 4th quarter 2018 Press Release (PDF, 83 KB) Sentiment in the euro area continued to weaken this quarter. The ifo Economic Climate for the euro area fell significantly from 19.6 points to 6.6 points, plunging to its lowest level since mid-2016. Experts downwardly revised their assessments of both the current economic situation and their expectations significantly. The euro area’s economy is moving into rough waters. In Italy and Spain in particular experts’ assessments plummeted. In Spain survey participants were markedly more pessimistic than last quarter about the economic outlook. They downwardly revised their assessments of the current

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Advance results of the ifo World Economic Survey (WES) of 4th quarter 2018

Sentiment in the euro area continued to weaken this quarter. The ifo Economic Climate for the euro area fell significantly from 19.6 points to 6.6 points, plunging to its lowest level since mid-2016. Experts downwardly revised their assessments of both the current economic situation and their expectations significantly. The euro area’s economy is moving into rough waters.

In Italy and Spain in particular experts’ assessments plummeted. In Spain survey participants were markedly more pessimistic than last quarter about the economic outlook. They downwardly revised their assessments of the current economic situation to a relatively small extent by comparison. In Italy experts’ assessments of both the current economic situation and expectations were far more negative. In Germany and France expectations remained almost unchanged, while assessments of current economic situation deteriorated somewhat. In the Netherlands, by contrast, assessments of the current economic situation improved.

Experts scaled back their export expectations for the euro area, reflecting beliefs that barriers to trade have grown higher. At the same time, a larger number of experts now believe that short and long-term interest rates will rise over the next six months; and that the US dollar will continue to strengthen. The forecast inflation rate for this year was raised from 1.7 percent to 1.8 percent. Experts’ confidence in economic policy continued to evaporate.

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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