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Economy in Brief

EU Readings Still Strong…but FADING
by Robert Brusca October 31, 2007

EU readings still strong…but countries and sectors are slowing

The accompanying chart shows the diminished lift in the aggregate EU sentiment index and the same result for the largest EMU nations. Only France is still showing Yr/Yr gains in sentiment; the rest have crossed the line to reveal Yr/Yr contraction. Not surprisingly Italy, probably the least competitive of the large EMU countries, is showing the sharpest contraction. Surprisingly France is the most resilient, but the chart also tells why. France did not enjoy the same degree of upswing that the others did. The EU and EMU members plotted had Yr/Yr gains of 12% or more at some point. France’s peak Yr/Yr gain came later and only amounted to 8%. In this way France seems to be a laggard that is prospering off the growth of others. That suggests that France’s decline will come later too. It does not promise that France’s decline when it comes will be shallower.

The top panel in the table below shows the relative strength of the individual sectors within EU. Construction is the relative strongest in that it is at the highest relative point in its own range at the 93.3 percentile. That is followed by the industrial and retail sectors at about a percentile reading of 85, consumer confidence at 75.9 and services at 65.8.

In terms of the major EMU nations plus the UK, France as we saw above is the relative strongest in EMU but, standing in the 88th percentile of its range, the non-EMU UK is stronger still. The EMU itself stands in the 73rd percentile of its range and the other major EMU countries are below that with Germany in the 63rd percentile, Italy in the 61st and Spain in the 50th. Over the last four months all of these are showing slippage. Europe is slowing down. Is it the strong euro or something else? With the spike in the inflation is the ECB still going to hikes rates? All interesting questions to stay in touch with, aren’t they?


EU Sectors and Country level Overall Sentiment
EU Oct
07
Sep
07
Aug
07
Jul
07
%tile Rank Max Min Range Mean R-SQ
w/
overall
Overall 109.5 110.6 113.1 113.3 82.9 48 117 74 43 100 1.00
Industrial 2 3 5 5 85.3 27 7 -27 34 -7 0.89
Consumer Confidence -5 -4 -3 -2 75.9 42 2 -27 29 -10 0.82
Retail 2 1 6 5 85.2 14 6 -21 27 -6 0.47
Construction 0 1 0 0 93.3 14 3 -42 45 -18 0.44
Services 19 19 22 20 65.8 61 32 -6 38 17 0.80
    % m/m     Based on
Level
Level  
EMU -0.9% -2.8% -0.9% -0.6% 73.7 70 117 74 44 100 0.94
Germany -0.6% -3.3% -0.9% -0.5% 63.7 64 121 79 42 100 0.62
France 0.1% -1.5% -1.2% 0.6% 81.4 26 119 72 47 100 0.80
Italy -0.2% -0.8% -3.0% -0.9% 61.5 90 121 72 49 100 0.79
Spain -2.7% -3.4% 1.1% -0.9% 50.4 178 118 67 50 100 0.66
Memo: UK -2.0% 1.1% 4.5% -5.7% 88.3 15 119 69 50 101 0.39
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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