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Economy in Brief

Euro-Zone Confidence Gains to Best Levels in 6 Years; Unemployment Reaches Record Low
by Carol Stone March 30, 2007

We've been talking about the improving economic conditions in Europe, and today the EC reported still more evidence. On a day when US consumer sentiment was reported to be down again, that in Europe improved, and the overall "sentiment indicator", which includes separate readings for various business sectors, gained 1.5 points to 111.2, the highest reading since January 2001. This index is based on a long-term average set at 100, so this reading is 11.2% "higher than average".

All the sectors contributed to the increase, although construction barely moved, going to 0.2 from 0.0 (these are "percent balance" measures, the percent of respondents with better conditions less that with worsening conditions). More distinctive changes came in industry, which increased from +5.4 in February to +6.1 in March. This reading ties with last November as the highest in the history of the survey, which runs back to 1985. Service businesses' confidence increased to 22.3 for March from 19.6 in February. Sentiment here has run much stronger than in other areas, with readings up in the 30's during the pre-2000 tech boom, so high as 22.3 sounds, it is not relatively as strong as other sectors. Retail trade moved to 0.0 from -1.1, but it had been above zero during much of 2006.

Consumer confidence remains negative at -4.4, but this is still the best level since the spring of 2001. People see the general economic situation as improving, unemployment declining and their own financial prospects also getting better. The only component of consumer confidence not moving favorably is planned savings, which dipped 0.2 to -7.8.

The unemployment situation as perceived by consumers runs close to the actual unemployment experience. That figure was reported today as well, for February. The harmonized rate for the Euro-zone EA13 edged down from 7.4% to 7.3%, the lowest in the 11-year history of these data. In fact, last November, the rate reached 7.6%, the first time it had been below 7.7%. And it's still improving.

EA13 Business & Consumer Sentiment, SA Mar 2007 Feb 2007 Jan 2007 Year Ago 2006 2005 2004
Economic Sentiment Indicator
(LT Avg = 100)
111.2 109.7 109.2 103.5 106.9 97.9 99.2
  Industry (% Balance) 6.1* 5.4 5.4 -0.7 2.3 -7.3 -4.7
  Services (% Balance) 22.3 19.6 19.6 14.5 18.1 11.1 10.6
  Consumers (% Balance) -4.4 -4.8 -6.5 -11.0 -9.0 -13.8 -13.9
Unemployment Rate (%) -- 7.3* 7.4 8.2 7.9 8.6 8.8
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