Economic developments in the euro area Euro Area Macroeconomic Developments Division Frankfurt am Main 1 October 2009

Economic developments in the euro area

Euro Area Macroeconomic Developments Division

Frankfurt am Main

1 October 2009

2

Real GDP growth

Sources: Eurostat and ECB calculations.Last observation: Q2 2009.

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

08Q1 08Q2 08Q3 08Q4 09Q1 09Q2

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

domestic demand (excluding inventories) changes in inventories

net exports total GDP growth

(quarter-on-quarter growth rate and quarterly percentage point contributions; seasonally adjusted)

3

Surveys

Purchasing Managers' Indices (PMIs) for the euro area

(monthly data; seasonally adjusted)

Source: Markit.Latest observation: September 2009.

expansion

contraction

30

35

40

45

50

55

60

65

2002 2003 2004 2005 2006 2007 2008 2009

30

35

40

45

50

55

60

65Manufacturing Services

4

GDP – Consumption

Private consumption and retail trade(quarter-on-quarter growth; contributions)

Sources: Eurostat and ECB.Last observation: Q2 2009 for Consumption, July 2009 for Retail sales and June 2009 for Retail sales plus car registrations.

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

05Q1 05Q3 06Q1 06Q3 07Q1 07Q3 08Q1 08Q3 09Q1

Retail sales Car reg.

Other Private cons. (%)

5

GDP – Consumption

40

50

60

70

80

90

100

110

120

130

140

150

2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2

Germany

France

Italy

Spain

United States

Euro area

Source: ACEA, A.A.A. and ECB calculations. Latest observation: June 2009.Note: Diamonds show the latest value of the index.

New Passenger Car Registrations(WDA&SA indices of 3-month moving averages, January 2008=100)

Car registration - euro area VS non-euro area.

60

65

70

75

80

85

90

95

100

105

2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2

Euro Area

Non-Euro Area

6

GDP and Employment (q-o-q % growth)

Sources: Eurostat and ECB.Last observations: 2009Q2.

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

96Q1 97Q2 98Q3 99Q4 01Q1 02Q2 03Q3 04Q4 06Q1 07Q2 08Q3

GDP

Employment

7

Investment (q-o-q % growth)

Sources: Eurostat and ECB.Last observations: 2009Q2.

-12.0-10.0

-8.0-6.0-4.0-2.00.02.04.06.08.0

96Q1 97Q2 98Q3 99Q4 01Q1 02Q2 03Q3 04Q4 06Q1 07Q2 08Q3

InvestmentConstructionNon-construction

8

GDP forecasts

Comparison of forecasts for euro area real GDP growth

(annual percentage changes)

Institution Date of release 2009 2010 2011

ECB staff macroeconomic projections Sept. 2009 -4.4 - -3.8 -0.5 - 0.9 -

European Commission Sept. 2009 (a) -4.0 -0.1 -

IMF July 2009 -4.8 -0.3 -

OECD June 2009 -4.8 0.0 -

ECB Survey of Professional Forecasters 2009 Q3 -4.5 0.3 1.5

Consensus Economics Sept. 2009 -3.9 1.0 1.4

Euro Zone Barometer Sept. 2009 -3.9 1.1 1.6

(a) Data for 2010 were published in May 2009.

9

HICP inflation and contributions from energy and foods

Source: Eurostat..Last observation: August 2009; September 2009 for Overall HICP.

(percentage points, annual percentage changes)

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

HICP headline inflation HICP excl. food and energy

10

Producer prices and survey data on prices

PMI Price survey data and Producer Price Inflation – Manufacturing Sector(Threshold-adjusted diffusion indices; annual growth rate in %)

Source: Markit, Eurostat.Latest Observation: September 2009 for PMI, July 2009 for PPI.

Upward price

pressure

Downwardprice

pressure-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09

-10

-8

-6

-4

-2

0

2

4

6

8

10

PMI: Input prices (left-hand scale)PMI: Prices charged (left-hand scale)Annual Producer Price Inflation (right-hand scale)

11

Unemployment and labour costs

-300

-200

-100

0

100

200

300

400

500

600

1999 2001 2003 2005 2007 2009

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0Monthly change (thousands; LHS) Unemployment rate (RHS)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1999Q1 2001Q1 2003Q1 2005Q1 2007Q1 2009Q1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Compensation per employeeTotal hourly labour costsNegotiated wages

12

Profits

-10

-8

-6

-4

-2

0

2

4

6

8

10

96 98 00 02 04 06 08

-5

-4

-3

-2

-1

0

1

2

3

Profits (gross operating surplus, lhs)

Profit margin indicator (rhs)

-60

-40

-20

0

20

40

60

80

Jan-74

Jan-77

Jan-80

Jan-83

Jan-86

Jan-89

Jan-92

Jan-95

Jan-98

Jan-01

Jan-04

Jan-07

Earnings growth of listed companies

13

Longer-term inflation expectations

Source: ECB and Reuters.

1.6

1.8

2.0

2.2

2.4

2.6

2.8

Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-091.6

1.8

2.0

2.2

2.4

2.6

2.8

5-year forward 5 years ahead BEIR5-year I/L swap rate 5 years aheadECB Survey of Professional Forecasters (long term)Consensus Economics (long term) Euro Zone Barometer (long term)

14

HICP forecasts

Comparison of forecasts for euro area consumer price inflation


Institution Date of release 2009 2010 2011

ECB staff macroeconomic projections Sept. 2009 0.2 - 0.6 0.8 - 1.6 -

European Commission Sept. 2009 (a) 0.4 1.2 -

IMF April 2009 0.4 0.6 -

OECD June 2009 0.5 0.7 -

ECB Survey of Professional Forecasters 2009 Q3 0.4 1.1 1.6

Consensus Economics Sept. 2009 0.3 1.2 1.6

Euro Zone Barometer Sept. 2009 0.3 1.2 1.7

(a) Data for 2010 were published in May 2009.

Labour markets and productivity

EU Countries Division

Frankfurt am Main 1 October 2009

16

Employment – sectors and countriesEmployment growth (annual growth rates)

Growth by sector Contributions by country

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

2004 2005 2006 2007 2008 2009

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

Const ruct ionIndust ry excl. const ruct ionServicesT otal economy

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2004 2005 2006 2007 2008 2009

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Germany SpainFrance Italyall other euro area count ries euro area

17

Hours and employment

Employment growth by hours worked and persons

(annual growth rates)

Source: Eurostat (STS and ESA databases).

Note: Hours worked in total industry.

DE and IT vs. ES - reflecting short-

time work arrangements

-14.0

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

Hours Persons Hours Persons

2003-2008 2009Q2

18

Structure of employment growth

Employment by gender(annual growth rates)

Source: Eurostat (LFS database).

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Male Female Male Female Male Female

2003-2007 2008 2009Q1

grow

th r

ate

DE ES FR IT Other EA

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

15-24 25-54 55-64 15-24 25-54 55-64 15-24 25-54 55-64

2003-2007 2008 2009Q1

grow

th ra

te


Employment by age(annual growth rates)

19

Structure of employment growth

Employment by level of educational attainment

(annual growth rates)

Source: Eurostat (LFS database).

Employment by contract type(annual growth rates)

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

Low

Med

ium

Hig

h

Low

Med

ium

Hig

h

Low

Med

ium

Hig

h

2003-2007 2008 2009Q1

grow

th r

ate


-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

Tem

pora

ry

Perm

anen

t

Tem

pora

ry

Perm

anen

t

Tem

pora

ry

Perm

anen

t

2003-2007 2008 2009Q1


20

Unemployment - countries

Monthly increase in unemployment(thousands of persons)

Source: Eurostat.

-100

0

100

200

300

400

500

600

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09

-100

0

100

200

300

400

500

600ES DE FR IE Euro Area (EA16)

21

Unemployment - structure

Unemployment

(% of labour force)

Source: Eurostat and ECB.

By age By gender

5.0

7.0

9.0

11.0

13.0

15.0

17.0

19.0

21.0


5.0

7.0

9.0

11.0

13.0

15.0

17.0

19.0

21.0

AdultYouthTotal unemployment

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0


5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

MaleFemaleTotal unemployment

22

Outlook - Unemployment projectionsProjected increase in the unemployment rate – EC (level in 2008 and 2010)

Euro Area (EA16) Non-EA EU member states

Source: Eurostat (LFS and AMECO databases).

Note: 2008 value refers to the 2008Q4.

0

5

10

15

20

es sk gr fr pt ie it de be mt fi lu s i at cy nl0

5

10

15

20

lv hu lt ee pl gb se ro bg cz dk

23

ULCs and profit margins

Chart : Compensation per employee, labour productivity and unit labour costs (annual percentage changes)

Chart : Labour productivity and profit mark-up developments*


Source: Eurostat and ECB calculations. * Profit mark-up defined as GDP deflator at basic prices minus unit labour costs. Last observation 2009Q2.

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

99Q

1

00Q

1

01Q

1

02Q

1

03Q

1

04Q

1

05Q

1

06Q

1

07Q

1

08Q

1

09Q

1

Labour Productivity (LHS)

Profit mark-up indicator (RHS)-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

99Q

1

00Q

1

01Q

1

02Q

1

03Q

1

04Q

1

05Q

1

06Q

1

07Q

1

08Q

1

09Q

1

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Labour productivity (LHS)Unit labour costs (RHS)Compensation per employee (RHS)

24

Labour Costs

25

Cost cutting strategies (WDN)

26

Labour productivity

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

Euro area

Euro area 3

US

Source: Eurostat and ECB calculations

Labour productivity per person in the euro area and the US: 1999Q1 - 2009Q2(annual percentage change)

Changes in output and employment in the euro area and the US: 2007Q3-2009Q2(annual percentage change)

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

Euro area GDPEuro area employmentUS GDPUS Employment

27

Hourly labour productivity in the euro area* and the US: 2001Q1-2009Q2 (annual percentage changes)

Sources: Eurostat, BLS, OECD, and ECB calculations. Latest observations: 2009Q2; * Hourly productivity is not available for all euro area countries. Euro area 3 refers to Germany, France and Italy; Euro area 8 also includes Austria, Cyprus, Finland, Ireland and Slovakia

Hourly labour productivity, euro area vs U.S.

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

20

01

Q1

20

02

Q1

20

03

Q1

20

04

Q1

20

05

Q1

20

06

Q1

20

07

Q1

20

08

Q1

20

09

Q1

Euro area 3

Euro area 8

US

28

Labour productivity – sectors and countries

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

Mar

-05

Jun-

05

Sep-0

5

Dec-0

5

Mar

-06

Jun-

06

Sep-0

6

Dec-0

6

Mar

-07

Jun-

07

Sep-0

7

Dec-0

7

Mar

-08

Jun-

08

Sep-0

8

Dec-0

8

Mar

-09

Jun-

09

Industry excl construction Construction T&T FRB

Source: Eurostat and ECB calculations

Sectoral contributions to aggregate labour productivity in the euro area(annual percentage change)

Country contributions to euro area labour productivity in industry (excluding construction)(annual percentage change)

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

DE FR IT ES

29

Productivity – a decomposition

Chart - Labour productivity growth and contributions in the euro area (average annual percentage changes and percentage point contributions)

Chart - Labour productivity growth and contributions in the United States (average annual percentage changes and percentage point contributions)

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1999-2002 2003-2006 2007 2008 (f)

capital s tock labour input TFP Labour productivity growth

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1999-2002 2003-2006 2007 2008 (f)

capital s tock labour input TFP Labour productivity growth

Sources: European Commission AMECO database; ECB calculations.

30

Wage rigidity (WDN)

Downward nominal and real wage rigidity across countries. IWFP Methodology.

0

0.2

0.4

0.6

0.8

DNWR DRWR

Source: the figures for Belgium, Denmark, Portugal and Spain are from Messina, Du Caju, Duarte, Izquierdo and Lynggård Hansen (2008), figures for Hungary are from Katay (2008b) the rest are IWFP figures from Dickens et al( 2007).

Documents

Economic developments in the euro area Euro Area Macroeconomic Developments Division Frankfurt am Main 1 October 2009