EU in recession

[Adamski]

Some interesting headlines

"Residential property prices in Germany continued their fall, dropping 10.2% in the third quarter from a year earlier in a further grim sign for the real-estate sector in Europe's largest economy,"

Last quarter, the euro zone economy contracted 0.1%, official data has shown, and December's Purchasing Managers' Index (PMI) - seen as a good gauge of economic health - suggested activity has now declined in every month of this quarter."

"In Germany the downturn worsened, pointing to a recession in Europe's biggest economy at the end of the year. Meanwhile activity declined faster than expected in France as demand for goods and services in the euro zone's second-biggest economy deteriorated further."

It's not just the UK that's struggling - here in the UK we've avoided recession so far, may have a shallow technical one. Admit there's been mismanagement of the country, but to put things in perspective - it's not just us, all countries in Europe are having problems getting things back to where they were pre pandemic - the lockdowns and war in ukraine/inflation have been very difficult to recover from.

[Dod101]

Some interesting headlines

"Residential property prices in Germany continued their fall, dropping 10.2% in the third quarter from a year earlier in a further grim sign for the real-estate sector in Europe's largest economy,"

Last quarter, the euro zone economy contracted 0.1%, official data has shown, and December's Purchasing Managers' Index (PMI) - seen as a good gauge of economic health - suggested activity has now declined in every month of this quarter."

"In Germany the downturn worsened, pointing to a recession in Europe's biggest economy at the end of the year. Meanwhile activity declined faster than expected in France as demand for goods and services in the euro zone's second-biggest economy deteriorated further."

It's not just the UK that's struggling - here in the UK we've avoided recession so far, may have a shallow technical one. Admit there's been mismanagement of the country, but to put things in perspective - it's not just us, all countries in Europe are having problems getting things back to where they were pre pandemic - the lockdowns and war in ukraine/inflation have been very difficult to recover from.

Comparatively speaking the UK is not struggling. Its economy is expected to overtake France's in the next year and growth will exceed most of the EU, including Germany. Inflation is coming down well, and in all we are making progress with no recession despite all the doomsters. I do wish people would stop talking down the UK.

Dod

[Adamski]

Comparatively speaking the UK is not struggling. Its economy is expected to overtake France's in the next year and growth will exceed most of the EU, including Germany. Inflation is coming down well, and in all we are making progress with no recession despite all the doomsters. I do wish people would stop talking down the UK.

Thank you. I do think we sometimes lose the bigger picture, amongst the politics.

[vand]

Rate cuts are moving forward all the time, but they all want to take their cues from the Fed, and the Fed doesn't meet in Feb so markets are pricing in the first Fed cut to start in March 24 (currently 85% chance of a cut at this meeting).

https://www.cmegroup.com/markets/intere ... -tool.html

Probably means other central banks will start their cutting in April. Don't be surprised if from then on they cut hard and fast.

I agree the UK is doing OK compared to EU, however neither is particularly strong or showing impressive decisiveness in leadership. I really do wish these supposedly independent central banks were actually far more independent and looking at conditions in their own backyard a little closer rather than waiting for everyone else to act first.

[Nimrod103]

Rate cuts are moving forward all the time, but they all want to take their cues from the Fed, and the Fed doesn't meet in Feb so markets are pricing in the first Fed cut to start in March 24 (currently 85% chance of a cut at this meeting).

https://www.cmegroup.com/markets/intere ... -tool.html

Probably means other central banks will start their cutting in April. Don't be surprised if from then on they cut hard and fast.

I agree the UK is doing OK compared to EU, however neither is particularly strong or showing impressive decisiveness in leadership. I really do wish these supposedly independent central banks were actually far more independent and looking at conditions in their own backyard a little closer rather than waiting for everyone else to act first.

If our first rate cut doesn't come until April, I get that nasty feeling that the BoE is about to make another of those big policy errors which we have become used to over the last 25 years.

[Lootman]

Rate cuts are moving forward all the time, but they all want to take their cues from the Fed, and the Fed doesn't meet in Feb so markets are pricing in the first Fed cut to start in March 24 (currently 85% chance of a cut at this meeting).

https://www.cmegroup.com/markets/intere ... -tool.html

Probably means other central banks will start their cutting in April. Don't be surprised if from then on they cut hard and fast.

I agree the UK is doing OK compared to EU, however neither is particularly strong or showing impressive decisiveness in leadership. I really do wish these supposedly independent central banks were actually far more independent and looking at conditions in their own backyard a little closer rather than waiting for everyone else to act first.

If our first rate cut doesn't come until April, I get that nasty feeling that the BoE is about to make another of those big policy errors which we have become used to over the last 25 years.

The BofE is a lapdog to the US Fed.

[Mike4]

Rate cuts are moving forward all the time, but they all want to take their cues from the Fed, and the Fed doesn't meet in Feb so markets are pricing in the first Fed cut to start in March 24 (currently 85% chance of a cut at this meeting).

https://www.cmegroup.com/markets/intere ... -tool.html

Probably means other central banks will start their cutting in April. Don't be surprised if from then on they cut hard and fast.

I agree the UK is doing OK compared to EU, however neither is particularly strong or showing impressive decisiveness in leadership. I really do wish these supposedly independent central banks were actually far more independent and looking at conditions in their own backyard a little closer rather than waiting for everyone else to act first.

If our first rate cut doesn't come until April, I get that nasty feeling that the BoE is about to make another of those big policy errors which we have become used to over the last 25 years.

I agree. Especially as at the last meeting a fortnight ago, the vote was six in favour of no change, and three in favour of yet another rise in the base rate!

[stacker512]

If our first rate cut doesn't come until April, I get that nasty feeling that the BoE is about to make another of those big policy errors which we have become used to over the last 25 years.

Why would you want a rate cut? Isn't high interest better for savers holding cash?

[Tedx]

If our first rate cut doesn't come until April, I get that nasty feeling that the BoE is about to make another of those big policy errors which we have become used to over the last 25 years.

The BofE is a lapdog to the US Fed.

Agreed. Now it appears to me that the UK and the EU have been running some sort of currency peg to the US dollar.

[servodude]

If our first rate cut doesn't come until April, I get that nasty feeling that the BoE is about to make another of those big policy errors which we have become used to over the last 25 years.

I agree. Especially as at the last meeting a fortnight ago, the vote was six in favour of no change, and three in favour of yet another rise in the base rate!

But they're given a target of one nut and a choice of hammer to deal with it... in those circumstances you don't actually have very many options

[Mike4]

I agree. Especially as at the last meeting a fortnight ago, the vote was six in favour of no change, and three in favour of yet another rise in the base rate!

But they're given a target of one nut and a choice of hammer to deal with it... in those circumstances you don't actually have very many options

Yes but after you've cracked the nut with the hammer, you don't need to carry on hitting it and smashing it to smithereens.

What IS a smithereen anyway?

[dealtn]

I really do wish these supposedly independent central banks were actually far more independent and looking at conditions in their own backyard a little closer rather than waiting for everyone else to act first.

So who moved first the last time the direction of interest rates was changed? Fed or MPC?

[Nimrod103]

I really do wish these supposedly independent central banks were actually far more independent and looking at conditions in their own backyard a little closer rather than waiting for everyone else to act first.

So who moved first the last time the direction of interest rates was changed? Fed or MPC?

Ignoring the emergency Worldwide interest rate cuts caused by the pandemic, the Fed began raising interest rates in 2016 after the long period of ZIRP, while the BoE waited until 2017.

[TUK020]

But they're given a target of one nut and a choice of hammer to deal with it... in those circumstances you don't actually have very many options

Yes but after you've cracked the nut with the hammer, you don't need to carry on hitting it and smashing it to smithereens.

What IS a smithereen anyway?

A small fraction of a nut?

[Nimrod103]

Yes but after you've cracked the nut with the hammer, you don't need to carry on hitting it and smashing it to smithereens.

What IS a smithereen anyway?

A small fraction of a nut?

The ending -een often suggests an Irish Gaelic origin, and indeed Google suggests it comes from the Irish plural word for "little bits". Probably from Irish soldiers in the First World War, I would guess.

[dealtn]

So who moved first the last time the direction of interest rates was changed? Fed or MPC?

Ignoring the ...

So ignoring the actual question, and the accusation the BoE only moves after the FOMC.

[scotview]

Are energy prices not far more important than bank rates ?

[Nimrod103]

Ignoring the ...

So ignoring the actual question, and the accusation the BoE only moves after the FOMC.

I think the question was whether the UK (and the EU) wait for the Fed to change interest rates before doing it themselves. It is certainly a widely held view I think. Covid was a once in a Century (?) external shock, so should be removed from the data, as different countries were at slightly different stages of the infection/immunization trajectory.

Considering changes in interest rates in response to the normal ups and downs of the business cycle, looking at the ZIRP experience, it is clear that the Fed started to raise interest rates before Europe, so fits in with the widely believed pattern.

[scrumpyjack]

Must be due to Brexit! Oh, whoops, it's them in recession, not us

[MrFoolish]

Must be due to Brexit! Oh, whoops, it's them in recession, not us

We've been scraping around flat growth. I wouldn't be too sure we are not going into recession.