Sunday, 2 September 2012

Banca D'Italia €-coin index falls in August to -0.33%

Banca D'Italia, the central bank of Italy, published its €-coin report on 31 August 2012 which provides a summary index of the current economic situation (estimated GDP growth) in the euro area,

  • In August €-coin fell to -0.33% from -0.24% in July.
  • The deterioration was due principally to the growing pessimism of businesses and households, only partially offset by the rise in share prices.

Counting the red dots (actual change in GDP) shows that there are 21 observations when actual GDP growth was lower than the €-coin estimate while 12 were better. Although hardly empirical evidence, it indicates the index is perhaps too optimistic, meaning there is a chance the current economic situation is actually worse than what the index currently indicates. But the index certainly indicates a worsening of the economic situation in the euro area as it has fallen from around 0.75% in mid 2009 to its current level of -0.33%.

But remember that GDP and GDP growth are poor measures for economic performance as a country can simply decide to increase government spending to increase both (which is not a good thing!).


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