20180807-NATIXIS-Euro_zone__The_weak_spontaneous_growth_dynamics_7页_856kb

Flash Economics Summary

Core Content

This document provides an economic analysis of the euro zone's growth dynamics, focusing on the impact of external and internal stimuli on its economic performance. The analysis highlights the limited organic growth potential of the euro zone, emphasizing the role of external factors and monetary policy in driving recent economic activity.

Main Views

1. Weak Spontaneous Growth Dynamics

• The euro zone's spontaneous growth dynamics, excluding external and monetary stimuli, are very weak, averaging slightly over 1% per year.
• This weak growth is a concern, as it suggests that the economy is not self-sustaining and relies heavily on external factors.

2. The Double Stimulus

The euro zone has benefited from two major stimuli since 2016:

a. Global Trade Recovery

• A recovery in global trade and exports since 2016 has had a positive impact on the economy.
• The increase in exports has led to a rise in imports, with a 1% increase in exports resulting in a 0.6% increase in imports.
• Exports and imports have a significant weight in euro-zone GDP, as shown in Chart 2.
• The effect of export growth on corporate investment is substantial: a 1 percentage point increase in export growth leads to a 1.5% increase in investment.
• The upswing in global trade explains a 1.3 percentage point rise in GDP growth in 2017.

b. Expansionary Monetary Policy

• The euro zone has seen a very expansionary monetary policy since 2014, characterized by low interest rates relative to the nominal growth rate.

• This policy has had mixed effects:

  • Boosted household income by reducing the interest on debt.
  • Reduced interest income for households, leading to a net negative effect on household spending (by 0.25 percentage points of GDP).
  • Increased corporate earnings by lowering the cost of debt, which in turn boosted corporate investment.
  • Supported housing investment through lower interest rates.

• Despite these positive effects, the overall impact of the monetary policy on growth has been limited due to the negative net effect on households.

3. Growth Without the Double Stimulus

• The document estimates that without the double stimulus, the euro zone's GDP growth in 2017 would have been 1.2%, which is significantly lower than the actual growth rate.
• This highlights the weakness of the euro zone's internal growth mechanisms.

Key Information

• Growth Forecast Table (Table 1):

  • 2010: 2.02%
  • 2011: 1.68%
  • 2012: -0.80%
  • 2013: -0.21%
  • 2014: 1.36%
  • 2015: 1.97%
  • 2016: 1.78%
  • 2017: 2.56%
  • Source: Natixis

• Econometric Estimates:

  • A 1 percentage point increase in export growth leads to a 1.5% increase in corporate investment.
  • A 1 percentage point increase in corporate profits leads to a 0.24 percentage point increase in corporate investment.

• Conclusion:

  • The euro zone's growth has been largely driven by external trade recovery and expansionary monetary policy.
  • Spontaneous growth is weak, indicating a reliance on external and policy-driven factors rather than internal economic strength.

Disclaimer and Legal Information

• The document is intended for professionals and qualified investors only and is strictly confidential.
• It does not constitute a financial analysis and is not in compliance with legal requirements for investment research independence.
• The information is for general distribution and does not take into account specific investment needs.
• No personalized investment recommendations are provided.
• No liability is accepted by Natixis or its affiliates for the distribution, use, or consequences of the document.
• The document is subject to regulatory restrictions in various jurisdictions and must be handled accordingly.
• Natixis is supervised by the ECB and authorized in multiple countries, including France, Italy, Spain, the UK, and the UAE.
• The views expressed are personal and reflect the judgment of the authors, not necessarily that of Natixis.
• The document is not an offer or solicitation for any transaction and is not a complete analysis of all relevant factors.

Regulatory Information

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• Germany: Supervised by ACPR, limited regulation by BaFin.
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• U.S.: Distributed to major U.S. institutional investors under Rule 15a-6.

Final Note

• The document is not a financial analysis and is not intended to be used as a basis for investment decisions.
• No responsibility is accepted for the accuracy or completeness of the information.
• The statements and assumptions are subject to change at any time.