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Eurozone Construction Output Falls

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Eurozone Construction Output Falls

In a very thin data day, due to many national labor holidays, Eurostat has taken the opportunity to publish some construction output statistics. The year on year Construction Output (working day adjusted) has been announced as 5.2% for the month of March, this is in comparison to February’s number of 6.7%. Month on month the Construction Output (seasonally adjusted) figure is -0.6 % versus a 0.1% reading in February.

The Eurozone has no doubt entered the recovery phase but has done so very reluctantly. Key economic metrics for the Zone are progressing but in a very sluggish way. Positive growth predictions are undergoing moderate scale backs and unemployment, although improving, remains in double figures. Contrast this to peer developed economies such as the US, UK or Canada where the return to growth appears both clear and strong. Key however is that none of the central banks in any of these economies has had to take monetary easing action.

The European Central Bank (ECB) has also withheld definitive monetary easing actions over the past eight months, so what is the difference. It can be argued that non-Euro developed economies had been fundamentally more stable to begin with, and this is a partly valid reason.

A second reason worth exploring is the contrasting attitudes of the various central banks. The European Central Bank, unlike it’s peers in developed economies has not laid out a clear plan or timetable for it’s future medium term actions. All central banks react to changing economic environments and markets expect and accept these course adjustments so long as clarity remains. The ECB however appears to be continually waiting for updates in economic data and this behavior contributes to further uncertainty in the markets. There is a reason for this, the ECB is in effect serving many masters in the variety of multiple disparate economies, this ties the hands of the Governing Council who politically find it easier to make no policy changes until they become absolutely essential, this makes the ECB reactive rather than proactive which in turn hampers economic development.

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