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Economy in Brief

EU Index is Still Sinking Fast…Inflation in EMU Still High
by Robert Brusca May 29, 2008

The EU overall sentiment reading fell to 96.7 in May from 98 in April. The EMU area’s overall index was unchanged in the month. For the EU area, the industrial sector continues to be the relative strongest. We gauge this NOT from the absolute index value for the month but from its ranking for the month within its own range (see percentile or rank column). The industrial sector has a raw reading of -3 but a range percentile standing of 70.6 percent. In contrast the services sector has a stronger looking +6 raw reading, but that reading resides in the bottom 30 percentile of its range. Since sectors have different intrinsic averages and volatility we view the percentiles as a superior way to assess the readings across the various measures. Comparisons to the mean also makes this clear since the service sector mean is +16 compared to its current reading of +6 while for the industrial sector the average reading is -7 and the current reading is -3.

Retail and construction sectors are in moderately good shape at the border of the top third of their respective ranges, consumer confidence is quite weak residing in the 44th percentile of its range.

Country indices are uniformly lower, with Germany having the relative best reading of this group in the 65th percentile of its range followed by France in the 60th percentile of its range. Italy is in the 47th percentile of its range, even with the sharp jump in its sentiment index this month. Spain is in the 25th percentile of its range and the UK, a large EU (not EMU) member, stands in the 44th percentile of its range.

The components readings: The EU/EMU region is still having some difficulty. The EMU sentiment indicator stalled this month but the EU measure continued to fall at a fairly rapid pace. The service sector has been moving sideways for several months, while consumer sentiment, having steadied in earlier months, fell sharply in May, amid some very weak component readings. For industry, confidence has stayed aloft while most components are showing decay. The production expectation reading is the weakest relative component in the industrial sector survey. Retailing shows encroaching weakness in employment expectations and in orders placed. For services all of the main components are around the bottom third of their respective ranges. Construction is a relatively solid sector with firm component readings in the top third of their respective ranges. While the industrial sector has the highest range readings its components look weaker. Time will tell how ell Europe holds up as the strong euro continues to take a toll along with ebbing financial distress and a weakening global environment.

EU Sectors and Country level Overall Sentiment
EU May
08
Apr
08
Mar
08
Feb
08
%tile Rank Max Min Range Mean R-SQ
w/
Overall
Overall 96.7 98 101.9 100.3 54.7 132 116 73 43 100 1.00
Industrial -3 -2 0 0 70.6 72 7 -27 34 -7 0.87
Consumer Confidence -14 -12 -11 -11 44.8 149 2 -27 29 -10 0.83
Retail -3 -6 1 1 66.7 48 6 -21 27 -6 0.47
Construction -12 -11 -9 -7 66.7 83 3 -42 45 -17 0.42
Services 6 6 11 6 31.6 104 32 -6 38 16 0.81
    % m/m   May
08
Based
on
Level
Level  
EMU 0.0% -2.5% -0.6% 97.1 54.6 123 117 73 44 99 0.95
Germany 0.2% -1.2% 0.3% 103.0 65.1 83 116 79 37 99 0.73
France -3.2% -2.4% 0.0% 99.8 60.0 120 119 72 47 100 0.79
Italy 3.3% -1.7% -1.3% 95.1 47.6 144 121 71 50 100 0.79
Spain -1.1% -3.8% -4.1% 79.8 25.5 194 118 67 51 100 0.62
Memo:UK -5.4% -8.5% 10.7% 90.6 44.2 179 118 69 50 101 0.44
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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