thile competitive pressures continued to contribute to an easing of credit standards Net demand for loans to enterprises remained stable in the first quarter of 2019, after having increased since the second quarter of 2015, and was mainly supported by the low general level of interest rates At the same time, net demand for housing loans continued to increase in the first quarter of 2019, also driven mainly by the low general ates Euro area banks agai programme had a positive impact on their liquidity position and market financing conditions and a negative impact on their profitability over the past six months, which included the Eurosystems net asset purchases until December 2018. The APP had an easing impact on banks' credit terms and conditions and a positive impact on their an adverse impact on banks'net interest income, it continued to support lend had lending volumes. In addition, while the ECB's negative deposit facility rate(DFR) Very favourable lending rates continued to support euro area economic growth In February 2019 the composite bank lending rate for loans to NFCs remained broadly is close to its historical low in May 2018. The composite ba lending rate for housing loans remained stable in February at 1.80%, also close to its historical low in December 2016(see Chart 11). Composite bank lending rates for loans to NFCs and households have fallen significantly and by more than market reference rates since the ECB's credit easing measures were announced in June 2014. The reduction in bank lending rates for loans to NFCs, as well as for loans to small firms(assuming that very small loans of up to E0. 25 million are primarily granted to small firms), was particularly significant in those euro area countries that were most exposed to the financial crisis. This indicates a more uniform transmission of monetary policy to bank lending rates across euro area countries and firm sizes Chart 11 Composite bank lending rates for NFCs and households (percentages per annum Households for house purchase 2013 2014 2015 2016 17 2018 2019 Notes: Composite bank lending rates are calculated by aggregating short and long-term rates using a 24-month moving average of new business volumes. The latest observation is for February 2019 In January 2019 net issuance of debt securities by euro area NFCs recovered part of the decline that occurred during the last quarter of 2018. The latest ECB data indicate that, on a net basis, the total flow of debt securities issued by NFcs in ECB Economic Bulletin, Issue 3/2019- Update on economic and monetary developments
ECB Economic Bulletin, Issue 3 / 2019 – Update on economic and monetary developments Money and credit 20 while competitive pressures continued to contribute to an easing of credit standards. Net demand for loans to enterprises remained stable in the first quarter of 2019, after having increased since the second quarter of 2015, and was mainly supported by the low general level of interest rates. At the same time, net demand for housing loans continued to increase in the first quarter of 2019, also driven mainly by the low general level of interest rates. Euro area banks again confirmed that the ECB’s asset purchase programme had a positive impact on their liquidity position and market financing conditions and a negative impact on their profitability over the past six months, which included the Eurosystem’s net asset purchases until December 2018. The APP had an easing impact on banks’ credit terms and conditions and a positive impact on their lending volumes. In addition, while the ECB’s negative deposit facility rate (DFR) had an adverse impact on banks’ net interest income, it continued to support lending. Very favourable lending rates continued to support euro area economic growth. In February 2019 the composite bank lending rate for loans to NFCs remained broadly stable at 1.65%, which is close to its historical low in May 2018. The composite bank lending rate for housing loans remained stable in February at 1.80%, also close to its historical low in December 2016 (see Chart 11). Composite bank lending rates for loans to NFCs and households have fallen significantly and by more than market reference rates since the ECB’s credit easing measures were announced in June 2014. The reduction in bank lending rates for loans to NFCs, as well as for loans to small firms (assuming that very small loans of up to €0.25 million are primarily granted to small firms), was particularly significant in those euro area countries that were most exposed to the financial crisis. This indicates a more uniform transmission of monetary policy to bank lending rates across euro area countries and firm sizes. Chart 11 Composite bank lending rates for NFCs and households (percentages per annum) Source: ECB. Notes: Composite bank lending rates are calculated by aggregating short and long-term rates using a 24-month moving average of new business volumes. The latest observation is for February 2019. In January 2019 net issuance of debt securities by euro area NFCs recovered part of the decline that occurred during the last quarter of 2018. The latest ECB data indicate that, on a net basis, the total flow of debt securities issued by NFCs in 0 1 2 3 4 2012 2013 2014 2015 2016 2017 2018 2019 Non-financial corporations Households for house purchase
January 2019 turned positive again after being negative in the last two months of 2018. This is in line with the seasonal patterns observed over the last few years, in which issuance at the beginning of the year has tended to rebound following a perio of weakness in the last few months of the previous year. From a more medium-term perspective(see Chart 12), the annual flows of debt securities were slightly above E40 flows of debt securities issued continued to be relatively strong in February bur o u billion in January 2019, close to the level at which the annual flows of debt securities seem to have settled since November 2018. Available market data suggest that net moderated in March 2019, albeit remaining positive. In January 2019 total net issuance of quoted shares by NFCs continued the decline from its recent peak in the summer of 2018. Nevertheless, the annual flows of net issuance of quoted shares remained high and close to the levels recorded in 2014 Chart 12 Net issuance of debt securities and quoted shares by euro area NFCS (annual flows in EUR billions) 12/1106/121212061312/13061412/406151215061612/6061712/17018128 lotes: Monthly figures based on a 12-month rolling period. The latest observation is for January 2019 Financing costs for euro area NFCs declined marginally in January 2019 from the level recorded at the end of the previous year. The overall nominal cost of external financing for NFCs, comprising bank lending, debt issuance in the market and equity finance, declined to 4.7% in January and is projected to have declined significantly further in February and March 2019. The cost of financing in March 2019 is estimated to be only 16 basis points above the historical low of December 2014 and much below the levels observed in the summer of 2014. the estimated decrease in the cost of financing since the end of the fourth quarter of 2018 reflects a decrease in both the cost of equity and the cost of market-based debt. The decline in both measures is mainly accounted for by the decline in the long-term risk-free rate and, to a somewhat lesser extent, by the decline in risk premia ECB Economic Bulletin, Issue 3/2019- Update on economic and monetary developments
ECB Economic Bulletin, Issue 3 / 2019 – Update on economic and monetary developments Money and credit 21 January 2019 turned positive again after being negative in the last two months of 2018. This is in line with the seasonal patterns observed over the last few years, in which issuance at the beginning of the year has tended to rebound following a period of weakness in the last few months of the previous year. From a more medium-term perspective (see Chart 12), the annual flows of debt securities were slightly above €40 billion in January 2019, close to the level at which the annual flows of debt securities seem to have settled since November 2018. Available market data suggest that net flows of debt securities issued continued to be relatively strong in February but moderated in March 2019, albeit remaining positive. In January 2019 total net issuance of quoted shares by NFCs continued the decline from its recent peak in the summer of 2018. Nevertheless, the annual flows of net issuance of quoted shares remained high and close to the levels recorded in 2014. Chart 12 Net issuance of debt securities and quoted shares by euro area NFCs (annual flows in EUR billions) Source: ECB. Notes: Monthly figures based on a 12-month rolling period. The latest observation is for January 2019. Financing costs for euro area NFCs declined marginally in January 2019 from the level recorded at the end of the previous year. The overall nominal cost of external financing for NFCs, comprising bank lending, debt issuance in the market and equity finance, declined to 4.7% in January and is projected to have declined significantly further in February and March 2019. The cost of financing in March 2019 is estimated to be only 16 basis points above the historical low of December 2014 and much below the levels observed in the summer of 2014. The estimated decrease in the cost of financing since the end of the fourth quarter of 2018 reflects a decrease in both the cost of equity and the cost of market-based debt. The decline in both measures is mainly accounted for by the decline in the long-term risk-free rate and, to a somewhat lesser extent, by the decline in risk premia. -25 0 25 50 75 100 125 12/11 06/12 12/12 06/13 12/13 06/14 12/14 06/15 12/15 06/16 12/16 06/17 12/17 06/18 12/18 Debt securities Quoted shares
Boxes What the maturing tech cycle signals for the global economy Prepared by Marcel Tirpak A maturing tech cycle has been one of the factors behind the significant trade slowdown in China at the turn of the year. the tech cycle argument rests on the fact that China and other key Asian economies, including Japan, are closely integrated through supply chains concentrated, especially, in the production of computers ar other electronic devices-the tech sector the maturing tech cycle may reflect a number of factors: it could be associated with more structural sector-specific drivers such as the possibility of an increasing level of saturation in the global market for smartphones and for new data centres; it could relate to mini-cycles linked to the launch of new models of tech products; or it may signal, more generally, a turn in the global business cycle. This box reviews basic characteristics of the Asian tech sector and shows that it has played an important role in the recent weakness in Chinas trade At the same time the box also suggests that the trend in the global tech cycle associated with weaker trade in Asia may be bottoming out. Weak merchandise imports from other key Asian economies have accounted for a substantial share of decelerating Chinese imports in recent months(see Chart A). Imports from the United States have also declined, partly as retaliatory tariffs on soybeans have diverted Chinese demand for soybeans to Brazil. At the same time, China has significantly increased imports of various commodities, including crude oil For the purposes of this box, tech sector is used to refer to the manufacturing of computers, electronic and electrical equipment. ECB Economic Bulletin. Issue 3/2019-Boxes What the maturing tech cycle signals for the global ec
ECB Economic Bulletin, Issue 3 / 2019 – Boxes What the maturing tech cycle signals for the global economy 22 Boxes 1 What the maturing tech cycle signals for the global economy Prepared by Marcel Tirpák A maturing tech cycle has been one of the factors behind the significant trade slowdown in China at the turn of the year. The tech cycle argument rests on the fact that China and other key Asian economies, including Japan, are closely integrated through supply chains concentrated, especially, in the production of computers and other electronic devices – the tech sector3 . The maturing tech cycle may reflect a number of factors: it could be associated with more structural sector-specific drivers, such as the possibility of an increasing level of saturation in the global market for smartphones and for new data centres; it could relate to mini-cycles linked to the launch of new models of tech products; or it may signal, more generally, a turn in the global business cycle. This box reviews basic characteristics of the Asian tech sector and shows that it has played an important role in the recent weakness in China’s trade. At the same time, the box also suggests that the trend in the global tech cycle associated with weaker trade in Asia may be bottoming out. Weak merchandise imports from other key Asian economies have accounted for a substantial share of decelerating Chinese imports in recent months (see Chart A). Imports from the United States have also declined, partly as retaliatory tariffs on soybeans have diverted Chinese demand for soybeans to Brazil. At the same time, China has significantly increased imports of various commodities, including crude oil. 3 For the purposes of this box, “tech sector” is used to refer to the manufacturing of computers, electronic and electrical equipment
Chart A Chinese imports by exporting country and regions Noy 17-Feb 18 Tech Asia United States Commodity Euro area 间购 rs " Tech Asia denotes Japan, Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam. "Commodity exporters ommodity-exporting emerging market economies, as well as Australia, Canada, New Zealand and Norway. China and other Asian economies are specialised in tech sector production and satisfy around half of global demand for tech products. China alone accounts for nore than a quarter of the sector,s global value added. The structure of Asian economies, with a notable exception of India, which specialises in IT services skewed towards tech production. This sector accounts, on average, for around 7% of total value added in the region. a high degree of specialisation in tech production is even more pronounced when looking at exports, where tech products account average, for more than a quarter of exported goods from the region(see Chart B). Asia dominates the tech sector also from a global perspective: it accounts for around ha the sector's global value added and for more than two-thirds of global tech exports Asian tech exports account for 10% of total global trade ECB Economic Bulletin. Issue 3/2019-Boxes What the maturing tech cycle signals for the global ec
ECB Economic Bulletin, Issue 3 / 2019 – Boxes What the maturing tech cycle signals for the global economy 23 Chart A Chinese imports by exporting country and regions (USD billions) Sources: China Customs via Haver Analytics and ECB calculations. Notes: Total Chinese nominal imports are represented by the blue bars and exporting countries and regions by the red and green bars. Chinese imports from the respective countries and regions from the first period to the second period are represented by the red (lower) and green (higher) bars. “Tech Asia” denotes Japan, Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam. “Commodity exporters” includes all commodity-exporting emerging market economies, as well as Australia, Canada, New Zealand and Norway. China and other Asian economies are specialised in tech sector production and satisfy around half of global demand for tech products. China alone accounts for more than a quarter of the sector’s global value added. The structure of Asian economies, with a notable exception of India, which specialises in IT services, is skewed towards tech production. This sector accounts, on average, for around 7% of total value added in the region. A high degree of specialisation in tech production is even more pronounced when looking at exports, where tech products account, on average, for more than a quarter of exported goods from the region (see Chart B). Asia dominates the tech sector also from a global perspective: it accounts for around half of the sector’s global value added and for more than two-thirds of global tech exports. Asian tech exports account for 10% of total global trade. 150 154 158 162 166 170 Nov 17-Feb 18 Tech Asia United States Brazil Commodity exporters Euro area Rest of the world Nov 18-Feb 19
Chart B Specialisation in the tech sector is common across Asian economies (percentages: index: 2015) s of global tech value add 6 Tech exports c of country 's exports) Computers, electronic and electrical equipment(D26T27)in the OECD's Trade in Value Added database. The size of the bubbles on the graph refers to the relative share of a country's tech value added in global tech value added. Asian The Asian tech supply chain connects advanced economies and emerging markets, with China the largest producer of final products. Japan and Korea are positioned upstream in the supply chain and, together with Taiwan, specialise in the production of semiconductors and chips. China remains the key assembler of final products in spite of a significant decline in import intensity The import content of its tech production, which is subsequently exported, declined to 27% in 2015 from 40% only a decade ago, pointing to its declining dependence on intermediate goods sourced from the region. A country s relative position in the supply chain determines whether domestic macroeconomic developments could provide useful signals also for global trends While the global tech cycle turned in early 2018, an orderly slowdown followed by some stabilisation seems the most likely scenario looking ahead. Recent indicators of the tech cycle point to a slowdown in the global tech cycle(see Chart C) However, there are some signs that suggest a stabilisation in the period ahead. First, financial market expectations for sectoral developments in the region - approximated by~thePhiladelphia some bottoming out this year, after falling in 2018. Second, while the global PMI for new export orders in the manufacturing sector has remained below the expansion-contraction threshold of 50, the pace of its decline in recent months has en significantly less steep than in the first half of 2018. Although it covers a broader set of exported products, it also shows a fairly high correlation with sectoral stock prices and thus could provide some further evidence of stabilisation in the global tech sector. And third, Korean exports of semiconductors-often used as another leading indicator of activity in the tech sector- have recently shown signs of stabilisation Broader indices of activity in the technology sector, which are published with a and include the us tech pu electronic components also suggests some limited weakening in the sector's growt nomentum. Overall, therefore, the turning of the global tech cycle seems partly to ECB Economic Bulletin. Issue 3/2019-Boxes What the maturing tech cycle signals for the global econo
ECB Economic Bulletin, Issue 3 / 2019 – Boxes What the maturing tech cycle signals for the global economy 24 Chart B Specialisation in the tech sector is common across Asian economies (percentages; index: 2015) Sources: OECD and ECB calculations. Notes: “Tech sector” refers to “Computers, electronic and electrical equipment” (D26T27) in the OECD’s Trade in Value Added database. The size of the bubbles on the graph refers to the relative share of a country’s tech value added in global tech value added. Asian countries are shown in red. The Asian tech supply chain connects advanced economies and emerging markets, with China the largest producer of final products. Japan and Korea are positioned upstream in the supply chain and, together with Taiwan, specialise in the production of semiconductors and chips. China remains the key assembler of final products in spite of a significant decline in import intensity. The import content of its tech production, which is subsequently exported, declined to 27% in 2015 from 40% only a decade ago, pointing to its declining dependence on intermediate goods sourced from the region. A country’s relative position in the supply chain determines whether domestic macroeconomic developments could provide useful signals also for global trends. While the global tech cycle turned in early 2018, an orderly slowdown followed by some stabilisation seems the most likely scenario looking ahead. Recent indicators of the tech cycle point to a slowdown in the global tech cycle (see Chart C). However, there are some signs that suggest a stabilisation in the period ahead. First, financial market expectations for sectoral developments in the region – approximated by the Philadelphia Semiconductors Index (see Chart C, red line) – point towards some bottoming out this year, after falling in 2018. Second, while the global PMI for new export orders in the manufacturing sector has remained below the expansion-contraction threshold of 50, the pace of its decline in recent months has been significantly less steep than in the first half of 2018. Although it covers a broader set of exported products, it also shows a fairly high correlation with sectoral stock prices and thus could provide some further evidence of stabilisation in the global tech sector. And third, Korean exports of semiconductors – often used as another leading indicator of activity in the tech sector – have recently shown signs of stabilisation. Broader indices of activity in the technology sector, which are published with a somewhat longer lag and include the US Tech Pulse Index, and global trade in electronic components also suggests some limited weakening in the sector’s growth momentum. Overall, therefore, the turning of the global tech cycle seems partly to FR IN US JP KR MX CH UK DE CN IT MY PH SG TW 5% 20% 0 2 4 6 8 10 12 14 16 0 10 20 30 40 50 Value added from tech (% of country's VA) Tech exports (% of country's exports) of global tech value added