Last week’s news on the euro-zone brought the strongest signs yet that some parts of the currency union are starting to feel the effects of the deterioration in the international environment. In particular, German exports and industrial production fell sharply in August.
We are not expecting Germany or the rest of the euro-zone to grind to a complete halt. But with growth already set to slow as the boosts from the lower euro and oil prices fade, the impact of weaker external demand will further increase the pressure on the ECB to provide additional policy support.
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