Liberty Street Economics

« | Main | »

May 21, 2012

Just Released: The Euro‑zone Growth Outlook – Calm Before the Storm?

Joshua Abel,* Robert Rich, and Joseph Tracy

The European Central Bank (ECB) released the results of its 2012:Q2 Survey of Professional Forecasters (SPF) on May 3. As noted in our recent post, the previous survey conducted in January was worrisome because it not only reflected a marked slowdown and increased downside risks to the growth outlook, but also displayed many parallels to the 2008:Q4 survey, when Europe was in a deep recession. The current survey (collected April 17-19) indicates stabilization rather than a further deterioration in the growth outlook. As shown in the chart below, the mean forecasts at both the one-year-ahead (2011:Q4-2012:Q4) and one-year/one-year-forward (2012:Q4-2013:Q4) horizons indicate little change from the previous survey.


The next chart provides another encouraging sign. The most pessimistic survey participants were less worried about the risks of negative growth outcomes as the probabilities associated with the 90th (P90) and 75th (P75) percentiles declined at both horizons.


Taken together, an initial reading of the data would suggest concerns in mid-April were more focused on near-term growth and worries about a deeper and more persistent impact of the Euro-zone crisis on growth had lessened. The improvement in the current survey may reflect the impact of policy initiatives undertaken by the ECB and the European authorities subsequent to the 2012:Q1 survey, such as the second Long Term Refinancing Operations and the near-completion of the Greek sovereign debt restructuring. If this assessment is correct, then these policy initiatives were successful in the sense of generating additional time for solutions to the debt crisis to be developed and implemented.

Recent events, however, indicate that this stabilization may only have been a brief calm before the storm. The survey results do not reflect the impact of any unanticipated aspects of the latest electoral outcomes in Europe or new information on the soundness of the Spanish banking system. Moreover, the elevated level of uncertainty of the survey participants is consistent with the view that their outlook for Europe can change quite quickly. The next ECB-SPF will be collected in July and released in August, and will remain an important source of information for monitoring the European growth outlook and its risks.

*Joshua Abel is a Research Associate in the Research and Statistics Group.

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

About the Blog

Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.

Economic Research Tracker

Image of NYFED Economic Research Tracker Icon Liberty Street Economics is available on the iPhone® and iPad® and can be customized by economic research topic or economist.

Economic Inequality

image of inequality icons for the Economic Inequality: A Research Series

This ongoing Liberty Street Economics series analyzes disparities in economic and policy outcomes by race, gender, age, region, income, and other factors.

Most Read this Year

Comment Guidelines


We encourage your comments and queries on our posts and will publish them (below the post) subject to the following guidelines:

Please be brief: Comments are limited to 1,500 characters.

Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.

Please be relevant: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post.

Please be respectful: We reserve the right not to post any comment, and will not post comments that are abusive, harassing, obscene, or commercial in nature. No notice will be given regarding whether a submission will or will
not be posted.‎

Comments with links: Please do not include any links in your comment, even if you feel the links will contribute to the discussion. Comments with links will not be posted.

Send Us Feedback

Disclosure Policy

The LSE editors ask authors submitting a post to the blog to confirm that they have no conflicts of interest as defined by the American Economic Association in its Disclosure Policy. If an author has sources of financial support or other interests that could be perceived as influencing the research presented in the post, we disclose that fact in a statement prepared by the author and appended to the author information at the end of the post. If the author has no such interests to disclose, no statement is provided. Note, however, that we do indicate in all cases if a data vendor or other party has a right to review a post.