Economic activity finished last year on a weak note and most business surveys suggest that things did not improve in January. Italy went back into recession in the second half of 2018 and the evidence suggests that economic activity there has continued to contract. German industry has been hit by a slump in external demand and slowdown in household spending. Some sector-specific problems in the auto industry have dragged on into the fourth quarter, but there has also been a broad-based cyclical slowdown. The only notable piece of good news was that core inflation edged up in January. But it was still only just above 1%, so is still a long way below the ECB’s inflation target.
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