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Economy in Brief


by Robert Brusca EU Indices Remain High-valued, but Main Index also Edges Lower,  Pace Slows  July 31, 2007

Even as the overall EU index of sentiment stays at a high level, its 12-month change is withering.

The EU retail index is relative the strongest this month as it resides in the top 4 percent of its range (96.3 percentile). The construction and industrial sectors also are in their 9th percentiles. Consumer confidence is lower than that, in the top 14 percent of its range, while the service sector is only in the top one-third of its range. Still, these are firm-to-strong readings.

But main country, Germany, is off for two months running. Italy has a string of declines. Spain is off for only the current month. France continues to show higher readings.

The overall industrial construction and services sectors gave back ground this month. Consumer confidence and retailing held firm.

Overall we must characterize the readings from this month as strong. But we offer the chart at the top as a reminder that once the rate of change begins to slip, this usually it is an authentic sign that the overall index is heading for a peak (this index already has done that) and then for some degree of slowdown.

In past peaking episodes the momentum measure peaked and fell off fairly rapidly. In this episode the loss of momentum is clearly more gradual. In previous cycles, the move from negative to positive back to negative momentum was usually executed more quickly than is the case in this cycle. That slower trajectory into negative momentum is a hopeful indicator. While the EU is sliding to a slower pace of growth, its rate of slowdown will be milder than in past episodes.

EU Sectors and Country level Overall Sentiment
R-SQ
w/Confid
EU Jul-07 Jun-07 May-07 Apr-07 Percentile Rank Max Min Range Mean
Overall 113.3 115 115 113.6 91.7 18 117 74 43 100 1.00
Industrial 5 7 6 6 94.1 8 7 -27 34 -7 0.89
Consumer Confidence -2 -2 -1 -4 86.2 18 2 -27 29 -11 0.81
Retail 5 5 5 6 96.3 2 6 -21 27 -6 0.46
Construction 0 1 1 1 93.3 13 3 -42 45 -18 0.43
Services 20 21 23 22 68.4 57 32 -6 38 17 0.80
  % m/m Based on Level Level  
EMU -0.6% -0.4% 1.0% -0.1% 85.4 32 117 74 44 100 0.94
Germany -0.5% -0.4% 0.8% 1.3% 76.1 18 121 79 42 100 0.61
France 0.6% 0.0% 3.0% 0.1% 87.8 17 119 72 47 100 0.79
Italy -0.9% -1.3% -1.4% -1.0% 70.0 64 121 72 49 100 0.80
Spain -0.9% 1.2% -1.2% -2.2% 60.1 142 118 67 50 100 0.67
Memo: UK -5.7% 1.6% 3.4% -0.8% 80.4 48 119 69 50 100 0.37
Since 1990 except Services (Oct 1996) 208-Count   Services:126-Count
Sentiment is an index, sector readings are net balance diffusion measures
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