Monetary policy and the recent slowdown in manufacturing and services

Niccolò Battistini and Johannes Gareis

Economic Bulletin Boxes, 2024, vol. 8

Abstract: Manufacturing activity has been weak since the end of 2021, while market services activity has started to slow down more recently. This box uses a lead-lag analysis to examine how developments in manufacturing are correlated with services activity. It then assesses the implications of the recent monetary policy tightening for the near-term outlook across sectors through the lens of an empirical model. The lead-lag analysis shows that current dynamics in manufacturing contain information for near-term dynamics in services activity. The model-based assessment shows that monetary policy shocks have a larger and faster impact on manufacturing than on services and are consistent with a broadening of the impact of monetary policy tightening across sectors during 2023. JEL Classification: C11, E32, E52

Keywords: Bayesian structural vector autoregression model; Manufacturing; Monetary policy; Services (search for similar items in EconPapers)
Date: 2024-01
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbbox:2024:0008:4

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