Via Damien Boey at Credit Suisse:
Europe is slowing
Recent European data have surprised materially to the downside. For example, German industrial production and retail sales likely shrunk by around 0.9-1% in 1Q, after growing very strongly in 2017. Also, sentiment indicators have fallen sharply off historically high levels.
We are not surprised by these developments. Indeed, we expect to see more negative data surprises to come. Our proprietary European financial conditions index has historically been a reliable leading indicator of activity growth. It has been deteriorating steadily over the past few quarters to levels consistent with stagnation in the economy.