EUROZONE – The economic slowdown across euroland is worsening, according to Swiss Life Asset Management’s (UK) latest global economic summary.

The report suggests that despite stronger retail growth in Spain and the Netherlands and higher car sales in May, recent economic data confirms that overall there has been weaker activity in the euro-zone markets.

Looking at the situation from a yield perspective, yields at the long end of the curve should remain in the narrow range until early next year, says Swiss Life.

But it isn’t all doom and gloom. The report suggests that headline inflation has peaked and will soften markedly in the first half of 2002, whilst pay growth across euroland has eased in the first half of this year.
However, there are warning signals that “nasty surprises in German wage negotiations” can almost certainly be expected next year.

The European Central Bank is closely monitoring wage negotiations and this is influencing its decision to delay cutting interest rates for the second time this year, though lower growth could force a change of policy in this area with a 50 basis point cut in the refinancing rate before the end of the year, the summary argues.

The report believes that it is up to the US to lead the way in rallying the stock markets to stimulate a turnaround in the equity markets. Investors are still keeping out of the markets, however, because of disappointing earnings and an extreme lack of visibility in the technology sector.


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