Italian Consumers More Pessimistic But Dutch Producers A Little Less Pessimistic

Just how the European consumers and producers are reacting to the on going financial problems of the Euro Area can be inferred, to some degree, from measures of confidence. Two of these were published today--Consumer Confidence in Italy and Producer Confidence in the Netherlands.

In Italy, the ISAE (Instituto di Studi e Analisi Economica) index (1980=100) of consumer confidence fell in May to 105.4 from 107.9 in April.  The index is now down 7.2% from the recent peak of 113.6 in December, 2009.  The overall indicator is based on the consumers' appraisals of the general economic situation, one's personal economic situation, the current situation and the future situation.  Clearly confidence of the Italian consumers has been shaken by current events.  The index for the general economic situation was reduced by 5.8% in May and the index for the future situation by 3.8%.  The appraisal of the future situation is now close to the all time low reached in December 2008.  The indexes for one's personal economic situation and the current situation were reduced by only 0.3% and 0.5% respectively. The four underlying appraisals are shown in the first chart.

In contrast to the Italian consumer, the Dutch producer has become less pessimistic in May than he was in April as can be seen in the second chart.  The measure of producer confidence published by the Central Bureau of Statistics in the Netherlands is in the form of a percent balance between optimists and pessimists.  Producer confidence in the Netherlands has not been strong.  Ever since August 2008, the pessimists have outweighed the optimists.  A peak excess of pessimists, 23.5%, was reached in February, 2009.  Since then there has been a fairly steady decline in the pessimists but it was only in May of this year that there was an excess, though a small one, 0.4%, of optimists over pessimists. One factor that may account for some of the difference in the reactions of consumers and producers to the current financial turmoil is the declinein the euro.  A lower euro is good for exports and hence for producers, while a lower euro makes imports more expensive and hence is bad for consumers.