Editor's Note: Below is a brief excerpt from today's titled "The Evolving Process," written by Hedgeye Senior Macro analyst Darius Dale. In the excerpt below, Dale explains why we're bearish on European economic growth. Click here to learn more about the Early Look.
1. Backward-looking cyclical view
Real GDP growth in the Eurozone accelerated to a 6.5-year high of +2.1% YoY in Q2, but all the leading data we’ve seen reported for Q3-to-date (PMIs, consumer confidence and business confidence to be specific) is suggestive of a negative inflection off those highs. Moreover, YoY core inflation has yet to breach the top end of the +0.6% to +1.2% range it’s been stuck in for the last four years.
2. Forward-looking cyclical view
Base effects for Eurozone GDP growth are incredibly challenging over the NTM, while base effects for Eurozone CPI continue to steepen.
3. Key secular forces
Demographic headwinds get considerably more difficult throughout the Eurozone over the next 3+ years, while other key structural indicators suggest that Europe is still, well, Europe.
