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Economy in Brief

Confidence Improving in the Euro Area: Recession Ending?
by Louise Curley September 29, 2009

Eurostat reported today that its economic sentiment indicator (ESI) for September rose to 82.8 from 80.8 in August. The measure has now risen in the last five months from the low of 64.6 reached in March. Although it is still below its long term average of 100, the improvement that has taken place in the indicator suggests that economic activity in third quarter is likely to be positive for the Euro area as a whole. The attached chart of the month to month changes in the ESI and the quarter to quarter changes in GDP shows that the change in the ESI is a good predictor of subsequent changes in GDP.

Another indicator of rising sentiment in the Euro Area is the "EuroCOIN" indicator that was released a few days ago. This is a monthly indicator of GDP that, according to its authors, the Bank of Italy in collaboration with the Centre for Economic Policy Research, is "a real-time estimate of underlying trend of GDP. i.e. growth adjusted for short term fluctuations." The EuroCOIN indicator has been rising since January of this year and was slightly positive at 0.07 in September, the first time it was positive since June 2008. The second chart compares the EuroCOIN indicator with the changes in real GDP and like the ESI suggests an ending of the recession in the third quarter for the Euro Area as a whole.

  Sep 09 Aug 09 Jul  09 Jun 09 May 09  Apr 09  Mar 09  Feb 09 Jan 09
Eurostat Economic Sentiment Indicator (CSI) 82.8 80.8 76.0 73.2 70.2 9.73 64.6 65.3 67.2
EuroCOIN 0.07 -0.21 -0.42 -0.61 -0.88 -1.09 -1.22 -1.27 -1.21
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