Case-Shiller Home Price Index Posts 12.7% y/y Decline

The latest ISAE (Institute for Studies and Economic Analysis) surveys of confidence among entrepreneurs in Italy continue to show weakness. Even among retailers where confidence has held up fairly well, it declined 4.0% in April from March but was still only 2.5% below April 2007. Confidence among manufacturers and miners, which has been declining for over a year, declined 2.1% in April from March, and was 11.4% below April 2007. Confidence in the construction industry is available only through March. In that month confidence in the construction industry was down 3.7% from February and was 16.4% below March, 2007. These three confidence indicators are expressed as indexes with base year 2000 and are shown in the first chart.

The ISAE survey of confidence in the service industries is expressed in terms of percent balances. In April the excess of optimists over pessimists in all the service industries increased from 2.7% to 4.0% but in April 2007, the excess of optimists was 44.7%. Confidence in the personal service sector declined the most (-13 basis points) from March to April. Confidence in the business sector declined by 5 basis points and confidence in the financial sector services rose 2 basis points. Trends in confidence in the total, business, personal and financial sectors of the service industry are shown in the second and third charts where the steep declines in confidence over the past year in all areas are apparent.

The CBI survey shows sharp weakness on the part of consumers in April. Sales from one year ago register a -26 on this net balance scale. Orders are a -28.and sales for the time of year are assessed an even weaker looking -38. Indeed, sales for the time of year are in the bottom 9% of their range, the same as for year-ago sales. Orders are in the bottom 12 percent of their range. The expected readings that apply to May are similarly weak with orders in the bottom 25 percentile of their range. Sales for the time of year, as well as the Yr/Yr change in sales, stand in the lower 10 percentile of their respective readings. The UK retail sector is beginning to feel some pain. Inventories are rising and are expected to rise further next month. That could compound problems in the sector.

The INSEE household confidence reading is at its lowest mark since 1990. Living standards in the past and next 12-months are assessed as being in the bottom several percentage points of their range for the period. The same is true of the assessment of their financial situation by households.

Unemployment expectations remain subdued however in the lower 35% of their range and they are not on a clear rising trend either. Price developments are, however, high and rising reading in the 96th percentile of their range. The spending environment is assessed as beginning in the bottom quarter of its range since 1990. On balance French consumers are under pressure and showing some of the same conditions we see in Italy and in the UK. The last German assessment by consumers was up. So Germany has some very different dynamics in play despite the fact its industrial indicators are a tattered its consumers have gotten a second wind. The Euro Area is generally showing the impact from financial turmoil and high commodity prices along with a too-strong currency.