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Economy in Brief

EU/EMU Indices Crash Again In February
by Robert Brusca February 26, 2009

As the COIN index had predicted earlier in the week, the Euro area continues to labor under downward pressure in February. The sector indices for EU were mostly lower again in February as the EU sentiment index was at a new all-time low, at 61. The EMU sentiment index was on an all-time low as well. No EU sector looks to be anything other than in bad shape. The best of the sectors (construction) was in the bottom 10 percentile of its range and it still dropped by two points in the month of February. Retail sales did improve by one point in February to rise to a reading of -24.

Without splitting hairs, the country indices for sentiment are all very weak as well.

Looking a bit more closely at sector detail for industry, most of the components for this sector worsened on the month and worsened sharply. For example order volume fell from -49 to -57. Export order volume fell from a reading of -49 to -58. The production trend fell to -47 from -39. Employment was trimmed slightly compared to those metrics falling to -34 from -32. But then, employment does tend to lag other measures. Germany, France, Italy, Spain and the UK each saw a further deterioration in their industrial sectors in February.

Consumer confidence has spilled out to its lowest level in EU history. Its details are not reassuring. Respondents put their financial situation in the next 12-months in about the bottom 20th of its historic range. The economic situation in the next 12-months, too, is assessed as the worst ever. Expectations for unemployment are the highest in the history of the survey. All this worsens as we realize that respondents assess the past 12-months as the worst ever (since 1990). Clearly government support/stimulus programs are climbing up a steep slope to reassure people.

Retailing is somewhat better across EU. Retail sentiment components are generally in the bottom 10% to 15% of their respective ranges. The retail measure itself is in the bottom 7th percentile of its range and rose by one point on the month. Retailing improved in three of five major reporting EU nations, and one other country saw the sector’s sentiment gauge unchanged in Feb.

The service sector index fell by one point in EU and it fell across its components save for current demand holding steady at a reading of -19. Expected demand weakened by three points and both current and expected employment gauges fell. All services indicators were at the bottom of their respective all-time ranges. The five largest EU countries all had service sectors that ranked at about the bottom 20th percentile of their historic ranges.

The EU/EMU survey was uniformly weak again this month. There is no sign of stabilization but the rate of descent has slowed a bit in the last few months. Since we are at all-time lows, that slowing is to be expected. Still we don’t know if that slowing is for real, if the slowing in the pace of the drop will reverse, or when the trend might reverse. The forward-looking aspects of the various surveys are not encouraging us to be optimistic.

EU Sectors and Country level Overall Sentiment R-SQ
EU Feb
09
Jan
09
Dec
08
Nov
08
Percentile Rank Max Min Range Mean w/
Overall
Overall 61 63.2 66.6 73.5 0.0 220 116 61 55 99 1.00
Industrial -37 -33 -32 -25 0.0 220 7 -37 44 -8 0.88
Consumer Confidence -32 -31 -28 -24 0.0 220 2 -32 34 -11 0.85
Retail -24 -25 -25 -18 3.2 218 6 -25 31 -6 0.60
Construction -38 -36 -32 -28 8.9 206 3 -42 45 -18 0.44
Services -29 -28 -23 -18 0.0 145 32 -29 61 15 0.86
    %m/m   Feb
09
Based on Level Level  
EMU -2.7% -2.5% -10.3% 65.4 0.0 220 117 65 52 99 0.95
Germany -1.6% -4.0% -6.4% 73.2 0.0 220 121 73 48 99 0.68
France -0.8% -0.7% -10.6% 74.2 4.7 219 119 72 47 99 0.81
Italy -0.4% -1.4% -11.7% 71.6 0.0 220 121 72 50 100 0.81
Spain -3.2% 3.7% -7.2% 67.0 0.6 219 117 67 50 100 0.71
Memo: UK -6.3% -10.9% -0.6% 56.4 0.0 220 117 56 61 100 0.55
Since 1990 except Services (Oct 1996)247 -Count Services: 145 -Count      
Sentiment is an index, sector readings are net balance diffusion measures
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