The Strategist

Business climate is worsening in the euro area

08/03/2018 - 11:48

In the third quarter of 2018, the indicator of business sentiment fell sharply due to the EU-US conflict around customs duties and protectionism.

Against the backdrop of the conflict around trade restrictions, the business climate in the euro zone has deteriorated significantly. In the third quarter of 2018, the index of business sentiment, compiled by the Institute of Economic Studies ifo, fell by 11.5 points to 19.6 points. So far, the surveyed experts consider the current situation to be only slightly less favorable than in the previous quarter. At that, they estimate the outlook for the coming months much less optimistically, the institute said on Thursday, August 2.

The indicator of business sentiment for the coming months has fallen to the lowest level since the end of 2012. "This indicates a weakening of the current situation in the euro area," - said ifo’s Head Clemens Fuest.

At the same time, business sentiment worsened in the five largest economies of the euro zone. "In particular, experts sharply lowered their forecasts for Germany, Italy and the Netherlands," Fust further pointed out. At the same time, the current situation in Germany and the Netherlands is assessed positively. In France and Spain, this indicator also remains at a positive level, but has significantly decreased in Italy.

In addition, experts again expect stagnation of investment in the euro area for the first time since the end of 2012. "The current debate on customs fees and protectionism has led to a significant deterioration in expectations in the export sector," said ifo’s Head.

The index of business sentiments ifo is based on a survey of 367 experts conducted four times a year.

On June 1, the US duties on steel and aluminum from Europe went up, respectively, at 25 and 10 percent. They affect goods imported from Europe for a total of 6.4 billion euro. In response, the European Union imposed import duties on certain goods from the United States.


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