Belgium by the numbers, March 2015
1. GDP 4th quarter (compared with 2014): +1,3%
2. Inflation from February 2015 to March 2015 in Eurozone: No change
3. Industrial production in December actual: -2,4 %
4. Unemployment rate in January: 8,5%
5. Current Account Balance in 2015 compared to last year: -0,1 % of GDP
6. Budget Balance (expected): -2,4% of GDP
7. Ten year government bonds (March 2015): 0,48%
Currency has been extremely volatile in the month of March due to the start of quantitative easing and low oil prices. Everyone has been focused on how quickly the quantitative easing program will stimulate the Eurozone economy as it started at the beginning of this past month. Draghi has made it clear that he is aggressively going to be buying these bonds including ones with negative rates as long as they don’t dip below -0,2%. This has caused more people to sell the euro with confidence that Draghi will buy negative bonds. For the first time since January 2003, the euro weakened to €0,95 per dollar in the beginning of March and has been fluctuating frequently before settling down to €0,93 per dollar at the end of the month.
The consumer index year over year has risen from February to March once again, which is a good sign that deflation is going away. While the inflation rate didn’t move this month, once the quantitative easing program starts stimulating the economy it should help increase inflation in the future and put any doubts of deflation away. In addition to the quantitative easing, the Federal Reserve is expected to raise interest rates sometime this year after jobs data beat most economists’ forecasts this month, which may help the exchange rate somewhat.
The unemployment rate remained at 8,5% for the most recent job data. All indicators point to this number reducing sometime in the foreseeable future even though it has been stable for quite some time. The ECB’s QE program in addition to Belgium’s aim to increase employment for people over the age of 50 should reduce the rate sooner than later. Over the past years and decades, the employment rate for elderly people has risen minimally, but the aim and hope of Belgium is to increase employment even further for this age group in view of the low birthrate and increasing longevity.
Ten-year government bonds hit a record low of 0,41% in the month of March but finished off at 0,48%. The record low signaled that the quantitative easing program had officially begun and the central banks had started to buy sovereign debt of Belgium. Even with the start of the program, some investors are continuing to buy bonds with the hope that the yields will fall even further and bond prices will rise.
The combination of lower oil prices, a weaker euro, and the positive outlook for quantitative easing have all caused Eurozone business confidence to jump for the month of March. Increased consumer confidence within Europe is a good sign that March will signal the end of a string of bad months for the Eurozone as a whole. Consumer confidence is the first step to the recovery and growth in Europe.
By Brandon LaBella at Dunhill Financial, to learn more about him:
https://www.linkedin.com/pub/brandon-labella/a7/814/477/
