The chart of the week is from Athanasia Kokkinogeni, Analyst for Europe:
“Gross Fixed Capital Formation (Fixed investment) is one of the most important indicators we follow in developed markets. We recently hit a major landmark: across the 5 largest economies in the EU, gross fixed capital formation is finally back to pre-crisis levels. It’s an interesting moment to reflect on just how badly these economies were hit during the eurozone crisis. It also shows how much opportunity remains.
Germany plays the role of the eurozone safe haven, and the ultra-low interest rates led to a massive domestic expansion in investment. Spain and Italy, which both saw massive runs on their domestic banking systems, experienced very sharp declines. The UK was the second best performer – but a drop in oil prices as well as the Brexit process discouraged investments, investor confidence evaporated and its trend line reversed. In France, on the back of Macron’s recent reforms and stronger global growth and trade, investment growth is finally coming back.
There is an optimism about the EU that we haven’t seen in a long time – and we’re finally seeing it backed up by hard data and not just in confidence surveys. There are still enough political hotspots, from Brexit to the Catalan crisis to the upcoming Italian elections to the recent appreciation of the Euro against the US Dollar, that multinationals should not lose discipline when it comes to contingency planning. But the EU is in an expansion cycle, and multinationals should take advantage.”
Have a question for Athanasia? Send her an email