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Haver Analytics
Europe
| May 27 2025

EU Indexes Small Rebound in May; Still Weak

Since mid-2023 there has been little change in the level of the EU indexes for the largest EMU economies. There has been slightly more fading for Germany, but then it has showed some revival over the past six months bringing it back into line. There is no clear evidence in these surveys that the U.S. tariff policy is having a major effect. But there is some inferential evidence from the drop in overall EMU consumer confidence although the results are still erratic across reporting countries. The economic situation for the next 12 months in the consumer survey is weaker since early-2025 and unemployment expectations have also risen. There is no discernible impact on consumers’ plans to make a new major purchase in the survey.

Overall sentiment and sector readings Eight of eighteen reporting countries in the EMU have step-backs in their sentiment assessments in May. That compares to eleven stepping back in April and ten in March.

The overall EMU sentiment gauge improves in May to 94.8 from 93.8 in April, but it is still below the March level of 95.1. For all of the EMU, the industrial sector improves in May, along with consumer confidence and retailing sentiment. Construction and services readings were unchanged month-to-month.

Rankings by sector show only retailing and construction above their historic medians on data since 1990. The overall reading as well as the industrial reading, consumer confidence, and services all have rankings below their respective 30th percentiles. Consumer confidence is weakest among the sectors attaining only its 18.6 percentile, but at a standing in its 22.4 percentile, services are not far behind.

There is no evidence of a hammer blow from the tariffs or of any revival since the tariff threat was launched then lessened. We look for some stimulus from the added need for Europe to carry more of its own defense burden. There is a directive to Europe from the U.S. to take care of more of its own NATO defense. So far, only the German industrial sector shows any sign of improving.

Italy performs the ‘best’ and Germany ‘the worst’ since early-2023

Sector ranking across the largest EMU economies in the EMU show ongoing weakness. Among the four countries listed and the five sectors plus the headline, there are 24 readings in the table; of which only eight have standings about their historic medians (rankings greater that 50%). The chronically weakest sectors across countries are for industry, confidence, Services, and of course overall sentiment. Only retailing and construction have EMU-wide standings above the 50% mark, largely driven by Italy and Spain. The service sector is uniformly the weakest although on a country-by-country basis both Italy and Spain log slightly weaker standings for consumer confidence than for services.

Summing up Neither trend nor sector results hint at any new developments- despite all the new news you are aware of! For now, Europe remains weak as it has been. But we know there are things in the mix to watch: the changing status of NATO and its responsibilities for members, U.S. tariff policy and the potential for a trade war to break out, the war in Ukraine that may – or may not - be winding down. There are many things in the mix that could change Europe’s dynamics for the better or worse.

  • Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media.   Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.

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