FINANCE
15
CONSTRUCTION EUROPE
OCTOBER 2013
Even if
Quantitative
Easing is
withdrawn
slowly, it will
take a lot of real-
world growth to
replace it
The equipment sector was
perhaps more volatile, with a
handful of much sharper gains
than seen among contractors
and materials producers. Doosan,
Haulotte and Hyundai were
up more than 20%, and there
were other double-digit gainers
in the shape of Hitachi, Kobe
Steel, Komatsu, Kubota, Manitou
and Terex. The only fallers in the
sector were CNH, Manitowoc and
Wacker Neuson.
With such a strong upside, it
may seem surprising the sector
as a whole did not move up
further. However, the problem
lay with the high capitalisation
companies that are the centre of
gravity of the segment.
Caterpillar for example, which
accounts for about 20% of the
CEE, gained only 0.69%, and
the next biggest player by
capitalisation – Deere – moved
by an almost identical 0.68%.
CURRENCIES
September was a mixed month
for the Euro, with a 1.51% loss
against the British Pound and a
slight slip of 0.12% against the
Swiss Franc. However, there was
notable strengthening against
the other reserve currencies.
The Euro put on 1.30% against
the US Dollar to take it to just
over €1 = US$1.35, about its
highest all year.
The 1.28% rise against the Yen
meanwhile, took the Euro to its
highest for more than two years,
at €1 = JPY133.7. That can be
comared to mid-2012 when the
rate was as low as €1 = JPY96 – so
nearly a 40% appreciation for the
Euro in around 14 months.
RESERVE CURRENCIES
Beginning
End
Change
Change
of period of period
(%)
British Pound
0.8554
0.8425
-0.0129
-1.51
Japanese Yen
131.96
133.66
1.69
1.28
Swiss Franc
1.2343
1.2328
-0.002
-0.12
US Dollar
1.3340
1.3513
0.0173
1.30
EUROPEAN CURRENCIES
British Pound
0.8554
0.8425
-0.0129
-1.51
Bulgarian Leva
1.9556
1.9561
0.0005
0.03
Czech Koruna
25.69
25.86
0.175
0.68
Danish Krone
7.4594
7.4577
-0.0017
-0.02
Hungarian Forint
298.93
298.44
-0.49
-0.16
Norwegian Krone
8.1256
7.9915
-0.1341
-1.65
Polish Zloty
4.2403
4.2253
-0.0150
-0.35
Romanian Lei
4.4350
4.4758
0.0408
0.92
Swedish Krona
8.7191
8.5960
-0.1231
-1.41
Swiss Franc
1.2343
1.2328
-0.0015
-0.12
Period: Week 34 - 38
Index
Beginning
End
Change
Change
of period of period
(%)
CEE (Equipment)
239.86
254.76
14.90
6.21
CEM (Materials)
145.04
153.99
8.95
6.17
CEC (Contractors)
138.99
147.51
8.52
6.13
CET (Total)
172.63
183.30
10.67
6.18
Dow
14964
15451
487
3.26
FTSE 100
6433
6575
142
2.20
Nikkei 225
13661
14742
1082
7.92
CAC 40
4033
4204
171
4.23
DAX Xetra
8378
8658
280
3.34
Period: Week 34 - 38
VALUE OF €1
KEY INDEXES
Improvement continues
Confidence in the European construction
strengthened in September according
to the results of the
CE
Barometer
survey.
The improvement followed an
encouraging up-tick in August,
but overall the recovery – if it is
one – still looks fragile.
One of the most noticeable
improvements was the improved
sentiment about the future outlook
for the industry. Already strong
in August with a balance of +30.2%
of respondents saying they expected
activity levels to increase over the next 12
months, September’s survey saw that figure jump once again to a
balance of +42.2%.The balance figure is the percentage of positive
responses, minus the number of negative ones.
Another important indicator was the fact that 2.4%of respondents
said they now found activity levels were higher than 12 months
ago. Although not positive by a convincing margin, it was the
second month running that this measure was in the black, after
sitting in negative territory since early 2012.
Respondents also said month-on-month activity picked up in
September, with a balance of +9.6% saying they were busier this
month than in August.
The strengthening of all three measures of confidence helped
the CE Climate – a broad measure of the state of the industry – rise
further, to +18.1%, from +12.2% in August. The last time it was at
these heights was mid-2011.
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CE
BAROMETER
The relative strength of the
Euro is surprising given that the
Euro area is by far the weakest
economy of the three. While
it struggles to climb out of
recession, the US is well on the
road to recovery, and Japan is
benefiting from the stimulus of
Abenomics.
But both these policies have a
huge amount of QE at their heart,
while the European Central Bank
has been fairly restrained in its
money printing. The downside of
QE, of course, is that it devalues
the currency by increasing the
supply of money, and this seems
to be a key factor in exchange
rates at the moment.
OUTLOOK
September’s stay of execution
on tapering was a boost to the
markets, but sooner or later
investors are going to have to
learn to live without QE in the
US. What kind of impact this
would have on the economy is
debatable. The first point is that
TAKE PART
The survey, which takes just a one minute to complete, is open to
all construction professionals working in Europe. The
CE
Barometer
survey is open from the 1st to the 15th of each month on our
website.
■
Full information can be found at
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the Fed has promised a gradual
withdrawal of this stimulus, and
has also said it is prepared to
ramp it up again if economic
growth falters.
On that score, the gradual
withdrawal of QE shouldn’t be
a huge shock to the system. On
the other hand, US$85 billion
(€63 billion) per month equates
to US$1,020 bilion (€756 billion)
per year – equivalent to about
6% of US GDP. In fact, this figure
represents at least 1% of the
global economy. It is clear that,
even if QE is withdrawn slowly,
it will take a lot of real-world
growth to replace it.
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