A Slight Improvement in Sentiment in the Euro-Area

Consumer and industrial confidence in the Euro Area increased slightly in February, the first increase since February of a year ago. Most probably the increases were due to the agreement on the terms of a program of debt restructuring for Greece that appears to have led to a collective sigh of relief. The balance of opinion on consumer confidence, which rarely shows a positive balance of opinion, was slightly less negative in February--from -20.7% in January to -20.3% in February. The balance of opinion on industrial confidence, which has been more robust than consumer confidence, rose from -7.0% in January to -5.8% in February. The first chart shows the balances of opinion on consumer and industrial confidence over the history of the two series.

Until mid 2009 the countries of the Euro Area did not differ much in the way they felt about their economies as can be seen in the second chart that shows the sentiment indicators of the Euro Area, Germany, Spain, Portugal and Greece It was about that time that the debt problems in Spain, Portugal, Ireland and Greece began to appear and the sentiment indicators began to diverge as can be seen in the second chart. Today, while the sentiment indicator for the whole Euro Area is 94.4, the indicator for Germany is 106.7 and that for Greece,74.9.

Note: There is no sentiment indicator for Ireland available in the EUDATA base but it is safe to assume that were it available it would not be too different from the patterns displayed by Spain, Portugal and Greece. (There is a measure of Irish Consumer sentiment in the IRELAND Database that we compare with the Greek measure of consumer sentiment in the EUDATA Database in the third chart. There is a fair correlation between the two series.