Investors should always seek official sources that are available to the public, as these will provide a slew of analytical information which will shed light into potentially market-sensitive catalysts. The European Commission provides a wealth of information through its publication arm that provides intricate details into the economic environment in the euro area. 

The latest dataset published by the European Commission provides upbeat numbers observed during the fourth quarter of 2019 as economic sentiment indicators (ESI) stabilised.

Indeed, the fourth quarter of 2019 relented the fall following the persistent downward trend seen since early 2018. The current index level is at 101.50 which is marginally higher than the long-term average of 100. On a similar note, the IHS Markit’s PMI Composite and the Ifo Business Climate Index (for Germany) showed signs of stabilisation. The best performing nations were Germany with an increase of 0.6 per cent and Italy with a significant improvement of 1.7 per cent. 

Most market analysts have called the fourth quarter of 2019 as the bottom for euro area economic growth. The economic dataset reflects a marginal improvement in data as headline risks fall and expected activity should pick up for 2020. Against this backdrop, the synchronised improvement in indicators gives partial credence to this view. 

The investment survey carried out by the European Commission registered a decrease of two per cent in 2019 when compared with 2018, as euro area manufacturers expect their investment to grow by 1.3 per cent. In relation to the EU developments, manufacturing managers anticipate a decrease of 1.7 per cent in investment, while 2020 should experience an uptick of 0.7 per cent. The European Commission expects manufacturing investment to increase by a total of two per cent.

The investment survey in the manufacturing sector indicates that both the euro area and EU real investment has decreased for the 2019 financial year, but there is an expected rebound in investment for 2020. Encouragingly, out of the reported investments for 2019, there was a mark-up in investment to expand production sites which is a precursor to economic upswings. Furthermore, this is expected to continue to grow for 2020. Even though data supports a reversal in economic dynamics for the euro area and the European Union, investors will have to keep close tabs with newly available economic data, as the current juncture will pivot in line with developing geo-political events, as well as, global economic performance. 

As noticed during 2018 which followed through 2019, the core European economic powerhouses got hit hard by global trade uncertainty as economic fundamentals faltered under these headwinds. The improving prospects on trade and the overall lowering in headline risks all act as drivers for 2020 to deliver a recovery. The context of policy intervention shall act as a bellwether to steer the eurozone economy into recovery mode and achieve a healthier trajectory. 

Disclaimer: This article was issued by Jesmar Halliday, investment manager at Calamatta Cuschieri. For more information visit www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.