Economics: Recession roadmap - euro edition

Good artists copy …

A month ago, Dom assessed the behaviour of cyclical indicators ahead of US recessions. This week, we’re replicating that work for the eurozone. In the context of a clear improvement in survey-based measures of activity, what do the results imply?

Money, credit, manufacturing orders, and retail spending have all peaked

Unsurprisingly, the money and credit data tend to provide a strong and consistent early signal. And that’s a worry given how weak they currently appear. The decline in retail trade volumes and manufacturing orders also suggest we’re on the road to recession.

Labour market resilience doesn’t tell us much about recession risk

While the labour market data, corporate profits, industrial production, and export volumes all appear remarkably resilient, those kinds of indicators are typically more coincident (or even lagging). An H2 downturn still seems most likely to us.