Investors Shrug Off Better-Than-Expected European Data

Investors Shrug Off Better-Than-Expected European Data

almost 4 years ago2 mins

Fresh Italian and European economic data proved surprisingly heart-warming on Tuesday. It’s just a shame investors only have eyes for the here and now these days 💘

What does this mean?

Industrial production data shows the output of a country’s machine-heavy sectors like manufacturing and utilities. They’re not the biggest contributors to developed market economies, but they do offer up valuable clues about consumer demand. And Italy’s January data probably came as a surprise to investors: activity was pretty much unchanged from a year ago, even though economists expected a big decline 📉

But backward-looking data doesn’t provide much comfort to investors at the moment. And we’re not just talking Italy’s: investors shrugged off a better-than-expected fourth-quarter economic growth report for the eurozone too. With this year having brought nothing but viral disruption, they’re far more concerned about this quarter – and the next, and the next…

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Why should I care?

The European Central Bank (the ECB) will update investors on its latest thinking – and its decision on the bloc’s interest rates – this Thursday. But with the eurozone’s rates already at record lows, there might not be much it can do to help the economy 🤷‍♀️ It’s likely the ECB will do something, mind you: if it admits it’s out of options, after all, it could undermine investor confidence and bring about the exact slowdown it’s trying to avoid.

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The Italian government’s planning to spend big – on infrastructure, tax cuts, and the like – to deal with the impact of coronavirus. That’s what’s known as “fiscal stimulus”, and it’s actually what the ECB has wanted eurozone countries to do for some time, rather than relying on its interest rate cuts. Still, it might be too little, too late: analysts are already forecasting Italy’s economy will shrink markedly this year.

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