Trade to the rescue?

For the economy to recover, we need to see the animal spirits reviving. Although sentiment indicators have indeed improved over the last few months, we don’t see much progress in hard data yet.

To be sure, the German Ifo-indicator rose for the third month in a row in November, while the European Commission’s economic sentiment indicator registered a stronger than expected increase last month. The €-coin indicator, a real-time estimate of the underlying growth pace, rose slightly from 0.13 in October to 0.15 in November, although this still suggests rather weak growth. There is hope that trade could offer some relief in 2020.

As a matter of fact, the eurozone is a far more open economy than both China and the US, explaining why the fall in global trade on the back of the trade war provoked significant collateral damage in Europe. Other positive news was the fact that President Donald Trump didn’t announce higher tariffs on European cars. This would have been an additional blow to the already battered German car industry. Finally, Boris Johnson’s landslide victory in the UK elections offers at least the advantage that there will now be more clarity on Brexit, although the negotiations for a new trade deal between the UK and the EU might still prove to be laborious.