Euro area GDP has stagnated over the past year, leaving output just 3 per cent higher than its pre-pandemic level. While somewhat better than in the UK, it is a far weaker recovery than seen in the US, where GDP stood nearly 9 per cent above its pre-pandemic level in the third quarter. Refresh this chart in your browser | Edit the chart in Datastream Looking to the GDP components, growth has been fairly subdued across the board. Household consumption has been sluggish at best and investment growth likewise. Government consumption has propped up GDP in recent quarters, and while net exports

So far 2021 has seen COVID-19 cases surging, with lockdown restrictions once again tightened across Europe. The good news is that we now have vaccines. The bad news is that vaccine rollout is progressing slower than many had hoped. Refresh this chart in your browser | Edit the chart in Datastream In the UK, as in most countries, priority for vaccination is rightly being given to the clinically vulnerable and to the elderly. NHS data for England show that 99% of fatalities have come from this group. In other words, vaccinating a group that represents just 25% of the population could prevent almost

UK Chancellor Sajid Javid has announced that there will be a budget on 11 March — the new government is expected to get the chequebook out to finance public investment in infrastructure and other projects. After stripping out the effects of the economic cycle, the UK government’s current receipts exceed its current expenditure by an amount equal to 2.0% of GDP, with the impact of the post-2010 austerity programme clear. Refresh the chart in your browser | Edit the chart in Datastream Fathom’s Macroeconomic Policy Indicator suggests that fiscal policy was broadly neutral for growth last year; with ample fiscal space, we

Refresh the chart in your browser | Edit chart in Datastream Fathom’s proprietary Economic Sentiment Indicator (ESI) for Japan fell to a five-year low of -0.7% in October following a hike in consumption tax from 8% to 10%. The last time this tax was increased, in 2014, economic output contracted sharply in the following quarter. To avoid a similar fallout this time, the government had announced an array of measures to soften the blow to consumers and businesses, such as exempting certain goods such as food from the higher tax rate, and offering a cashback scheme in small stores to offset the

Fathom’s monthly Economic Sentiment Indicators (ESIs) are designed to measure underlying economic sentiment. They use a technique known as principal component analysis to distil the information from numerous consumer and business surveys into a single composite indicator. The ESIs have been trained on quarterly GDP growth in their respective countries, and by construction have the same mean and variance as those series. They provide monthly updated estimates of underlying sentiment that display less short-term volatility than quarterly GDP growth. Our US ESI has troughed, supporting evidence from the Fathom Leading Indicator (FLI) that the world’s largest economy will avoid recession

The last three readings of Fathom Consulting’s UK Economic Sentiment Indicator (up to October), have been stuck at -0.2%, a level last seen towards the end of the global financial crisis. The negative outlook has been driven largely by Brexit uncertainty, with all 12 components of the ESI at lower than normal levels. Refresh the chart in your browser | Edit the chart in Datastream Despite contracting by 0.2% in 2019 Q2, data released earlier this month showed that the UK avoided a recession. Growth of 0.4% in July offset contractions in both August and September to show Q3 growth of 0.3%.

Fathom’s Economic Sentiment Indicators (ESIs) aim to distil the messages from numerous surveys into a single composite measure of underlying sentiment. Since 2017, there has been a gap between hard and soft economic data in Spain, as in other countries, but this is now starting to close, with Fathom’s Spanish ESI falling 0.2 percentage points to 0.6% in October. However, this is unlikely to represent a major turning point for the outlook for the Spanish economy. Indeed, domestic demand — the main driver of Spanish growth since the crisis — remains robust, increasing by 1.1% in the last quarter. This

Refresh the chart in your browser | Edit chart in Datastream The UK economy has avoided a technical recession, with output expanding by 0.3% in Q3 following a contraction of 0.2% in Q2. Nevertheless, the Q3 data were below both our own forecast (+0.5%), and the median forecast among private sector economists as surveyed by the Reuters Poll (+0.4%). The relatively new monthly measure of GDP is erratic. However, it suggests that UK economic output has been broadly flat for much of this year. Positive growth contributions from the household sector have, by and large, been offset by negative growth contributions from

Refresh the chart in your browser | Edit chart in Datastream Fathom’s Economic Sentiment Indicators aim to combine information from a range of surveys from multiple sectors to gauge underlying sentiment within the economy. Japan’s ESI has been on a continuous downward trend since the end of 2017 and continued to tumble throughout 2019 Q3. It has now reached its lowest level since November 2012, with a reading of -0.4%. Surveys which are forward-looking, rather than those focused on current conditions, appear more pessimistic. One example of this is the ‘economy watcher’s survey’ of employees in sectors that are sensitive to economic

Data released on Thursday showed that the euro area economy expanded by 0.2% in the third quarter of this year, in line with the predictions of Fathom’s Nowcast model. The reading, which was unchanged from the previous quarter and marginally above the average forecast of the Reuters Poll (0.1%), reflected small upside growth surprises in both France and Italy. Refresh the chart in your browser | Edit chart in Datastream Fathom’s euro area Economic Sentiment Indicator — which distils the information from numerous measures of consumer and business confidence into a single composite measure — has fallen substantially since the start of

Fathom’s UK Economic Sentiment Indicator (ESI) was -0.2% in September, unchanged from the figure for August. It has not registered such a low reading since the tail end of the 2008/09 recession. Our UK ESI provides a useful indicator of the underlying pace of economic activity, and tends to be less volatile than the official measure of GDP growth. With the date of the UK’s departure from the EU now further postponed, and with the prospect of a general election within the next few months, the risks to UK economic sentiment and to economic growth lie to the downside. Refresh

Fathom Consulting’s latest Global Economic and Markets Outlook (GEMO) central scenario envisages a continued pause in global trade growth, resulting from the ongoing uncertainty around the US and China’s trading relationship. Though this will — and has — been a drag on GDP, we see investors’ fears of a global recession as overblown. Our estimates point to a sharp reversal in trade growth, from 2% above trend in the middle of last year to 2% below trend now. While this fall is significant, it pales in comparison to the Global Financial Crisis, which was the deepest global recession in decades.