Economy in Brief: March 2023

Germany’s GfK climate measure continued to improve in April, but its improvement was only a gain of about one point on an index that remains severely weak. The climate index in April has been this week or weaker only 3.1% of the time since its inception. Even though there is now a string of six months in which consumer climate has been improving, these improvements are so small as to make the story, still a story about how weak conditions remain rather than about how there's a string of improvement underway.

The components for the climate index are made available to us with a one-month lag; we are looking at economic expectations, income expectations, and the propensity to buy in terms of values as of March. In March, economic expectations stepped back to 3.7 from a February value of 6; still the 3.7 reading was well above the January reading of -0.6 and the December reading of -10.3. The economic ranking has made a significant improvement and currently has a 44.1 percentile standing. That means that economic expectations have been this weak or weaker only about 44% of the time and they've been higher only about 56% of the time. The economic reading is closing in on a neutral reading which would occur at a rank or count percentile standing of 50%.

Income expectations improved slightly to -24.3 in March from -27.3 in February. Income expectations have been improving regularly: in December, for example, income expectations had a value of -43.4. Income expectations currently have a 4.3 percentile standing. That rank standing means that the income expectation reading has been this weak or weaker only 4.3% of the time.

The propensity to buy improved very slightly in March, rising to -17 from February’s -17.3. It improved in February compared to January; however, the current reading level is below December 2022 when the value was -16.3. The count or rank percentile standing for the propensity to buy is still weak at 19.3% indicating that this propensity has been this week or weaker about 19% of the time. That is roughly a bottom one-fifth standing.

Other Europe The table also presents some comparative readings for Italy, France, and the United Kingdom. The count or rank standing for Italy is at its 68.8 percentile. For France, the standing is at the 1.6 percentile. For the U.K., it's at the 5.9 percentile mark. Italy has a relatively robust ranking for consumer or household confidence at 68.8%. It has been higher only about 32% of the time. As for France and the U.K., the readings there have been lower rarely - on the order of less than 2% of the time for France and about 6% of the time for the U.K. In terms of month-to-month changes, Italy saw another increase in March, France saw a slight decline, and the U.K. saw a slight improvement. Compared March 2023 to December 2022, the Italian reading is at 105.1 compared to 102.5; the French reading is at 81.5, lower than December’s 82.4; the U.K.’s -36 reading in March is an improvement from its -42 reading in December.

Italian consumer confidence moved up to 105.1 in March from 104 in February; this gain continues a 2-month string of increases for the confidence measure. Confidence has now climbed above its median for the period since late-1997 and has a 58 percentile standing in that queue of data on that timeline.

The overall situation for the last 12 months has improved to a -90 in March from a -96 reading in February. It shows a rise of 19 points over three months compared with decline of 23 points over 12 months and has a 44.3 percentile standing, below its median for this period.

Looking ahead over the next 12 months, the overall situation is slightly firmer, up by plus one compared to a -1 reading in February. Unemployment, at -8 is less feared than it was in February at a -6 reading; the household budget has a +15-reading compared to +11 in February. Each of these readings reflects a month-to-month improvement. Each reading has improved for two months in a row. The assessment of the overall situation for the next 12 months has a 59-percentile standing. Concerns about unemployment have only a 17-percentile standing, indicating relative security on the part of the labor force. The household budget has a 62.6 percentile standing, above its historic median and a relatively firm reading as of March.

The household financial situation over the last 12 months has improved to -39 from -47 in February and it has a 46.6 percentile standing, below its historic median. The outlook for the next 12 months improves slightly to -14 from -15 in February and continues to show a weak reading with a 17.4 percentile standing. The outlook for the household sector financial situation is still quite poor.

Current household savings backtrack slightly in March and that series has backtracked for a number of months in a row but still has a 62-percentile standing. Household savings for the future backtracked in March compared to February, but February had improved sharply compared to January. That series has a 97.7 percentile standing, an extremely strong mark, indicating confidence in being able to save in the future.

The environment for making major purchases in March improved slightly to -42 from -45 in February; that in turn had improved from a -51 in January. That series has improved over three months by one point on a net basis although it's weaker by 9 points over 12 months and has a percentile standing in March of 35.1%, significantly below its median and close to the bottom 1/3 of its range of values experienced since late 1997.

Italy's business index improved to 104.2 in March from 103 in February and it's riding a string of small increases. Over three months the index has increased by 2.5%, but over 12 months it's declined by 6.1%. An improvement in the business index is a relatively nascent event. The percentile standing of the March reading is in its 56.9 percentile; that places it slightly above its historic median leaving it and what I would call tepid territory.