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Economy in Brief

EU Indices Continue to Make Progress, But...
by Robert Brusca  February 24, 2011

EU economic sentiment indices continue to make progress but the chart highlights that fact that the rate of change, while still positive is steadily abating. And while some sectors are going quite well others are quite stuck in a low track. The leading sector is the Industrial sector. It stands in the 96th percentile of its high-low range and is ranked in the 97th percentile in its ordered queue. It rarely gets much higher than this.

Retailing is the 80th percentile of its high-low range and in the 89th percentile according to its ranked queue. That is not bad but this sector is slipping as its raw reading fell from 8 in December to a plus one in February of this year. Germany, France, and Italy all have retail readings that stand at about the 75th percentile of their respective high-,low ranges. But for Germany the queue standing is in the 92nd percentile implying that while retail confidence has been higher it rarely has been much higher. For France the queue standing is in the 88th percentile with somewhat the same message as Germany. For Italy the queue standing is in the 75th percentile implying that for Italy higher readings do occur and they occur about 25% of the time. So retailing is effectively relatively strongest in Germany, followed by France and Italy. After that any measure of retailing shows weakness in other nations. The UK is the best of what's left at a 44 percentile standing in its queue, that's below the midpoint. Retailing clearly is still a problem area in the Zone, in terms of activity and in terms of prospects.

Not surprisingly consumer confidence remains in uneven shape. Its raw reading is -12 in February; that is an improvement but it is still below its average reading since Feb 1990 of -11. Consumer confidence stands in the 45th percentile of its queue of ordered values, below the mid-point and weak despite some modest improvement. When we look at confidence by county the results are shocking Germany's measure is the fourth highest since Feb off 1990 while in France, Italy, Spain, the UK, Greece and Portugal the highest rank in any of these countries is 150 in France and that puts the sector in its 40th percentile of its ranked queue.

The services sector is the job sector. It resides in the 63rh percentile of tis high-low range. It also stands in the 48th percentile of its queue. Its queue reading is weak and shows that the sector is below its median value. Services data are shorter-lived than those for other sectors with the overall measure going back only to March of 1995. The German service sector ranks 40th out of 165 observations. France ranks 40th and after France after we go to Portugal at a ranking of 109th. The best rankings by queue are France in the 75th standing of its queue and Germany in the 70th percentile of its queue.

On balance we can still be impressed by the resiliency in Europe as we see continued economic improvement in the face of austerity plans that now are beginning to bite and with ongoing issues recently come back to surface with demonstrations in Greece. Italy is sure to be hurt by the problems in Libya; it may also be affected by allegations of sexual improprieties against its PM and because the of the close relationships that PM fostered with now-troubled Libya.

The failure of the consumer sector to catch fire in Europe is still a troubling development. In Germany the retailing sector is well off its peaks in this cycle. The trends elsewhere are not very encouraging either. For the Zone as a whole retailing remains troubled and consumer confidence is in a low trajectory still improving, yes, but barely. To the extent that Europe is still running on industrial strength we have to wonder to whom are all these goods going to be sold and for how long can industrial strength be maintained without the consumer? China is part of the answer but can it really be the solution?

EU Sectors and Country level Overall Sentiment
EU Feb
%-ile Rank Max Min Range Mean
Overall Index 107.2 105.8 106.3 105.2 82.1 66 116 67 49 100
Industrial 6 5 5 1 95.7 8 8 -39 47 -7
Consumer Confid -12 -13 -12 -11 58.8 138 2 -32 34 -11
Retail 1 4 8 4 80.0 26 8 -27 35 -6
Construction -26 -28 -28 -28 35.6 157 3 -42 45 -19
Services 10 6 6 7 63.6 90 34 -32 66 11
  % M/M Feb
Based on Level Level
 EMU 0.9% -0.1% 1.2% 107.8 79.6 58 118 70 48 100
 Germany 1.1% -1.5% 1.6% 116.8 93.2 12 120 73 47 100
  France -0.4% 1.2% 3.2% 108.5 79.3 51 117 75 42 100
  Italy -0.5% -0.5% 0.6% 101.1 59.5 117 121 73 48 100
  Spain 2.4% 0.0% -0.5% 93.9 50.6 189 115 72 43 100
Greece 4.3% 3.3% -1.5% 79.4 23.0 232 120 67 53 100
Portugal 4.8% -0.1% 2.4% 94.7 53.9 180 117 69 48 100
Memo:UK 3.1% -2.9% 1.1% 101.9 73.1 129 116 64 51 100
All since Feb 1990 253 -Count Services: 173 -Count
Sentiment is an index, sector readings are net balance diffusion measures

EU Sectors and Country level Overall Sentiment
EU By Queue rank% Average Level is: Rank of Change
Overall Index 73.9% 100.0 53
Industrial 96.8% -7.4 59
Consumer Confid 45.5% -11.4 34
Retail 89.7% -6.4 209
Construction 37.9% -19.3 25
Services 48.0% 10.8 4
 EMU 77.1% 107.8 62
 Germany 95.3% 116.7 56
  France 79.8% 108.5 149
  Italy 53.8% 101.1 150
  Spain 25.3% 94.0 29
Greece 8.3% 79.6 15
Portugal 28.9% 94.8 15
Memo:UK 49.0% 101.9 40
All since Feb 1990 253 -Count Services: 173 -Count
Sentiment is an index, sector readings are net balance diffusion measures
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