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Economy in Brief

A Mixed Picture in European Confidence as Oil Prices Rise and Stock Markets Fall
by Louise Curley May 25, 2004

May data on consumer and business confidence are available for Belgium and the Netherlands, and business confidence for Germany (the IFO measure.) Confidence among both business and consumers had generally been steadily improving since early 2003 throughout Europe, but these recent data suggest that doubts are rising.

In May Consumer confidence fell in both Belgium and the Netherlands. Business confidence in Germany slipped for the third month in a row and, and in Belgium, fell sharply; but business confidence in the Netherlands rose by 2.3 percentage points and registered the first positive balance of opinion since August, 2002.

One factor eroding confidence is the rise in oil prices and its persistence. While these concerns have been reflected in the stock markets of the area, the recent declines in the stock markets probably reflect more uncertainties than just the price of oil and have affected confidence. In the attached chart we show the daily price of oil (West Texas Intermediate) inverted and the daily price of the German stock market over the past few months. (Trends in the German stock market are fairly typical of other European markets.) The rise in the stock market earlier this year has been virtually eliminated and similarly for the earlier decline in the price of oil.

Confidence May 04 Apr 04 May 03 M/M % Y/Y %  2003 2002 2001
  Business -1.7 0.6 -14.9 -2.3 13.2 -12.9 -7.9 -9.4
  Consumer -6 -4 -9 -2 3 -11 -2 -0
  Business 1.8 -1.4 -6.9 3.2  8.7 -5.6 -1.6 -1.1
  Consumer -28 -25 -36 -3  8 -35 -20 -1
  Business IFO 96.1 96.3 89.4 -0.2 6.7 91.7 89.4 92.1
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