Coppola Comment

The result of the EU referendum was a considerable shock - not just to the UK, but to the EU and indeed to the whole world. Just how big a shock it was is evident from the fact that the OECD has suspended its forecasts until September. It usually only does this for "significant unforeseen or unexpected events", such as a major earthquake or a tsunami. Brexit is a shock to the global economy of a similar order. And it has permanently changed the world. Whatever the future holds, we can be pretty sure that it will be very different from the dominant paradigm of the last forty years. The vote was highly disruptive. It created chaos in the UK, anger and confusion in the EU, and puzzlement and concern further afield. But as the fog clears, markets return to some kind of normality and a new UK government takes the reins, we can perhaps begin to discern what the future might hold. To everyone's relief, the UK's banking sector appears resilient: bank share prices hav...

The sun is shining, the daffodils are flowering. Blossom is on the trees. The dark days of winter are behind us: in front of us lies a bright, glowing spring. Black zeros reap golden rewards, it seems. What is all this about? German industrial production has suddenly bounced back from recent falls, rising by 3.3% month-on-month in January 2016. The German statistical agency DEStatis reports that there are particularly strong performances in construction, capital and consumer goods production: In January 2016, production in industry excluding energy and construction was up by 3.2%. Within industry, the production of capital goods increased by 5.3% and the production of consumer goods by 3.7%. The production of intermediate goods showed an increase of 0.4%. Energy production was up by 0.1% in January 2016 and the production in construction increased by 7.0%. According to Dominic Bryant of BNP Paribas ( quoted in the FT ), Germany is "booming". And in the same FT piece, Pa...

" The euro area economy is gradually emerging from a deep and protracted downturn. However, despite improvements over the last year, real GDP is still below the level of the first quarter of 2008. The picture is more striking still if one looks at where nominal growth would be now if pre-crisis trends had been maintained." So said Peter Praet, Member of the Executive Board of the ECB, in a recent presentation to the FAROS Institutional Investors' Forum. He's not wrong. From his presentation, here is a chart showing the difference between current output, current (estimated) potential output and projected output prior to 2007: That is indeed a striking gap. It is reflected in this chart from Eurostat (August 2015): So, the fall in GDP growth between 2007 and 2015 has resulted in a rise in unemployment of nearly 4 percentage points. Currently, across the Euro area as a whole (population about 340m), adult unemployment stands at 11% and youth unemployment ...

No , says  The Times ' David Smith . He says that the notion that there was a pause in austerity is an "austerity myth". He points to this chart  from the Office for Budget Responsibility  that shows fiscal consolidation as a percentage of GDP (relative to the 2008 Budget) continuing on   throughout 2013 and 2014 and 2015: But the OBR's chart doesn't actually show what I would define as austerity. It shows the size of the government budget as a percentage of GDP relative to previous budgets. That's a good deal of moving parts. And that creates a good deal of ambiguity. Under such a definition, if the economy grows and government spending stays constant, there has been fiscal consolidation. In fact, if the size of the budget  grows  but the economy grows more, there has still been "fiscal consolidation".  What I am referring to when I claim that Osborne paused austerity in 2013 is the pause in the slashing back of government spending. Simp...