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Economy in Brief

EMU Recovery Continues
by Robert BruscaJuly 30, 2009

BETTER: The EU commission indices for EU and EMU continue to show substantial progress. The EU index rose to 75.0 from 71.1 while the EU index rose to 76.0 from 73.2. The better showing in the EMU rise implies a better rise in the month by non EMU members of EU. On a mo/mo basis the UK index did rise sharply by 7.3% compared to Spain’s 5.3%, the best among large EMU nations.
…but still low: Overall the EU and EMU indices are standing the bottom 26% to 21% of their respective ranges. That is still a very low reading. But the UK has bounced some 31% from its lowest level on this overall index and Italy has risen by 25%. The least rebound by a major EU/EMU economy is the 11.9% rises from its low reading posted by Germany. Germany also has the lowest ranked sentiment index among large EU/EMU economies (even though it is third highest by raw score).

INDUSTRY: EU industry readings are only in the 19th percentile of their range like services. But unfortunately the worst reading on its components are from the selling prices expectation that is in the bottom 7% of its historic range and from orders that are in the bottom 3% of their range (both overall orders and export orders). The production trend is in the 23rd percentile of its range and production expectations are in the 35th percentile or their range - despite the weaker reading in orders. Employment is a sort of neutral 17.8 percentile reading which is the same as for EMU industry confidence overall. So we can’t say for industry that the problem is jobs, it’s just demand. 

SERVICE: Services Confidence in EMU stands at it 12.1% percentile lower than for EU overall (19.0%). The weakest reading for services is from current employment which is as low a reading as it ever has seen. Current demand is the next lowest in the bottom 10 percentile of its range. The business climate in services ranks in the 12th percentile overall. Expected demand and expected employment are more upbeat but still in only the 15th percentile of their respective ranges. Despite some monthly improvement employment in this sector is weak and expectations while improving are still very weak. The weakest service sector by the relative measure of the position of the index in its range is France followed closely by Spain; the strongest is the UK.

RETAILING: Retailing ranks in the 28th percentile of its range in EMU, making it relatively less strong than in EU (35th percentile). The present situation is rated as in the 26th percentile; the expected business situation is at a higher raw reading but a lower position in its range at the 23rd range percentile. Employment expectations are a weak 8% reading. The Italy has the highest retail range reading in the 46th range percentile compared to the UK in the 42nd percentile while Spain is at a 28 percentile reading, worst reading for a large EMU country. 

CONSUMER CONFIDENCE: Consumer confidence ranks about the same as the retailing reading, in the 29th percentile of its EMU range (below the 32.4 percentile for EU). Spain and Italy have the highest relative consumer rankings at or above a 50 percentile range reading; the UK reading is at the 42nd percentile. Germany stands the lowest among large EMU nations at the 16th percentile. EU consumers rate the past 12-months as in the bottom 5% of all readings historically. While the next 12-months reading posted a much, much higher 48th percentile reading. 

SUMMING UP: The consumer confidence results epitomize the EU/EMU results. Current conditions have improved from their worst. Yet the quantitative measures that look forward are not yet very strong. Still expectations for the future are advancing strongly in Europe. There seems to be a much more ‘hard to pin down’ blanket optimism about the future that is in existence. 

EU Sectors and Country level Overall Sentiment
EU Jul-09 Jun-09 May-09 Apr-09 Percentile Rank Max Min Range Mean By Queue rank% R-SQ
Overall 75 71.1 67.9 64 26.3 242 116 60 56 100 3.6% 1.00
Industrial -30 -33 -34 -36 19.6 244 7 -39 46 -7 2.8% 0.90
Consumer Confid -21 -23 -26 -28 32.4 224 2 -32 34 -11 10.8% 0.86
Retail -14 -17 -17 -21 35.5 232 6 -25 31 -5 7.6% 0.66
Construction -37 -37 -39 -38 10.9 232 4 -42 46 -16 7.6% 0.47
Services -19 -23 -26 -30 19.0 242 32 -31 63 11 3.6% 0.75
    % m/m   Jul-09 Based on Level Level    
EMU 3.8% 4.3% 4.3% 76.0 21.7 236 117 65 53 100 6.0% 0.95
Germany 4.1% 4.3% 1.5% 80.8 17.6 235 121 72 49 100 6.4% 0.70
France 0.4% 4.4% 3.9% 81.2 19.8 236 119 72 47 100 6.0% 0.84
Italy 4.4% 1.4% 7.3% 83.7 30.1 228 122 67 55 100 9.2% 0.83
Spain 5.2% 2.0% 2.1% 79.0 24.7 230 117 67 50 100 8.4% 0.73
Memo:UK 7.3% 4.1% 7.8% 73.8 24.5 242 128 56 72 100 3.6% 0.59
Since April 1988 251 -Count Services: 251 -Count          
Sentiment is an index, sector readings are net balance diffusion measures        

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