Last Thursday’s EMU-wide PMI figures failed to lift the fog of data to draw a clearer picture of when the trough in the eurozone is reached. ...….
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The weaker composite figure was driven by some strange and heavily diverging trends at the sector and country level. The Chinese PMI report sent mixed signals, too. US housing data were the bright spot of the week.
After the ECB’s game-changing OMT initiative as well as the institutional and political pro-euro events two weeks ago, the ball is now back with the governments again. Spain moves center stage once more. We expect a Memorandum of Understanding for late October or early November after the local elections – despite substantially lower yields now. And as we further outline in our first focus piece, any ESM program is likely to come with relatively little additional conditionality given the reform efforts already made or under way in Spain. We summarize what we think it will be.
This week, the French Draft Budget Law 2013 will be presented. In a second contribution, we come to the conclusion that the projected austerity package in France is likely to fall somewhat short of what is needed to bring the budget deficit down to 3% of GDP. In addition, the lack of details on the planned reduction in current expenditure raises some implementation risks.
As you (hopefully) know, we cannot resist a good opportunity to apply our analysis to important events, be they the Olympics or the current Oktoberfest. In a not-too-serious brief note, we looked at the renewed strong rise in the “Wiesn” beer price. Yes, beer inflation is accelerating, but it is driven more by barley prices than by the OMT – we think!!
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