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Mon, Jan 10, 2005 - Page 12 News List

Eurozone data to remain sluggish

AFP , BRUSSELS

Eurozone figures due out in the coming week will show the bloc's German and French economies are still sluggish, economists said.

In Britain, the Bank of England's rate-setting Monetary Policy Committee is expected to keep its key repo rate unchanged at 4.75 percent at a meeting on Thursday.

Bank of America economist Lorenzo Codogno said the closely watched German ZEW index for January, due tomorrow, was unlikely to show significant improvement in German economic momentum.

"The cutoff time for the survey was Jan. 7, but many answers had probably been provided before that deadline and we suspect that the huge correction in the euro/dollar value last week was not fully taken into account, while the appreciation in the previous period probably was," Codogno said.

"The recent decline in oil prices should be a modest plus. All in all, there is probably upside risk, but we suspect the improvement in the outlook should have remained limited," he said.

Exane's Emmanuel Ferry noted that the ZEW's recent decline came to a halt in December.

"The January report will therefore be one to follow closely. Either the downward trend resumes, or the pause is confirmed, temporarily at least," Ferry said.

He said the recovery of the dollar and the easing of oil prices suggested the index would stabilize this month.

Also tomorrow, both German and French industrial output figures are forecast to show a decline or at best stagnation.

Lehman Brothers economists said that while Germany's October release met with their expectations, the situation has since deteriorated.

"On the domestic side, there was a good start for retailing in October but a poor outturn for November. And the level of consumer confidence suggests that any underlying improvement in spending is likely to be muted," they said in a research note.

But German gross domestic product, to be published on Thursday, is expected to reveal a better performance last year than in 2003.

Ferry warned that German growth should fall back to 1.0 percent this year because of the slowing of the export sector and ongoing domestic weakness.

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