At this juncture, nobody should be surprised to get fresh evidence of economic malaise out of the eurozone, but just because it isn’t surprising, doesn’t mean it should go unreported.
Investor sentiment tumbled to the lowest level in more than six years in October, according to the Sentix economic index, which printed a horrendous -16.8, missing the most pessimistic estimate from more than a dozen economists (the range was -14 to -10.1). It was the worst print since April of 2013.
“There is no positive reaction to central banks’ aid measures, and economic assessments are broadly negative in October”, Sentix said, adding that “the recovery of expectations from [September] has completely evaporated”.
At -15.5, the current situation gauge now sits at an almost five-year nadir.
“Fears of recession are immanent”, the report says, flatly.
Meanwhile, the latest read on the German manufacturing sector was predictably dour. Factory orders fell twice as much as expected in August, dropping 0.6% on a MoM basis. Consensus was looking for a 0.3% decline.
But the MoM series is noisy. To get a sense of how bad things really are, you need the YoY chart, which shows demand slumping for 15 consecutive months.
For ECB doves, this is just more evidence in support of the Governing Council’s controversial September decision to relaunch net asset purchases. It simultaneously increases the sense of urgency around fiscal stimulus, despite Germany’s recalcitrance. One wonders what the pain threshold is in Berlin. Clearly, we haven’t reached it yet.
“There is a lack of awareness on the part of politicians and the public that quick answers must be found in order to counter the pace of the downturn”, Sentix managing director Patrick Hussy warned on Monday. “Monetary impulses are expected to produce wonders that they are increasingly no longer able to achieve on their own”.