Economy in Brief: September 2023

The European Commission indexes of overall confidence and sector assessments for September slipped lower and the European Monetary Union (EMU) with the overall gauge dropping to 93.3 from 93.6 in August. At that level, the overall index has a ranking among historical observations back to 1990 in its lower 24th percentile, an extremely weak reading.

Component or sector readings for EMU The component readings for the index show slippage or unchanged values for all components except the industrial sector where there was a month-to-month improvement in September to -9 from a -10 reading in August. The service sector assessment was unchanged in September at a level of 4.0. The retail and construction indexes each slipped to a reading of -6 in September from a reading of -5 in August. Consumer confidence in the EMU fell to -17.8 in September from -16 in August; it has the lowest component ranking among the five components at a 14.1 percentile standing in September. Confidence in the EMU is doing very badly. The industrial and services assessments also have standings below their 50th percentiles. Retailing and construction have percentile standings above their historic medians (which means they're above the 50th percentile). Construction has a relatively firm standing at a 70th percentile standing; retailing has a 58.7 percentile queue standing.

Country level performance in September 18 of 19 members report country level confidence readings for September; 8 of 19 members show month-to-month declines, the same number as in August and one more than July. Among the largest countries (Germany, France, Italy, and Spain), Italy and Spain showed declines in September while Germany, France, and Italy showed declines in August. Germany and France showed declines in July as well. The large countries have consistently been showing weakness. Because the overall European monetary union gauge is weighted for economic size, this weakness among the largest economies weighs on the overall index.

Standings show broad and intense weakness The monetary union gauge itself has a 24.2 queue percentile standing; this compares to a 15.9 percentile standing in Germany, the largest economy in the EMU. France, the second largest economy, has a standing at its 37.5 percentile. Italy, the third largest economy, logs a 41.1 percentile standing. Spain, the fourth largest economy, has a 39.5 percentile standing. Among the remaining 14 countries, only three have queue percentile standings above their 50% mark. Those are Malta with a 99.6 percentile standing, Greece with the 71.5 percentile standing, and Cyprus with a 62.7 percentile standing. Most countries large or small have overall sentiment standings below their 50th percentile and generally substantially below their 50th percentiles. Among the largest four economies, the highest percentile standing is from Italy with a 41.1 percentile standing; among the other 14 in the table, setting aside the three that have readings above the 50% mark, the highest percentile standing is 39.2% in Lithuania, followed by 33.6% in Slovakia, 29% in Latvia, and 28.5% in Luxembourg.

Monthly money and credit developments in July hinted at a possible reversal in the ongoing global declines in money and credit trends one month ago. However, in August the data for money and credit in the European Monetary Union (EMU), as well as money supply data from the U.S. and the U.K., show that the declines in money on the month are back in force. Only Japan shows an increase in money supply in August and that's not surprising since Japan has a legacy of positive money growth rates unlike other major monetary centers in this table.

EMU conditions Nominal growth- The European Monetary Union shows negative money supply growth in both July and August as well as over 12 months, six months, and three months. Money supply trends are flat with growth declining mostly at about a 2% pace or a little more over the three-, six-, and 12-month intervals. Credit growth in the EMU remains weak and registers tiny growth rates over 12 months compared to negative growth rates of about -1% over both three- and six-month horizons for overall credit and private credit.

Real growth- Inflation-adjusted growth rates for credit and money in the EMU show a table full of negative numbers. The steepest negative growth rate is over 12 months at minus 7% for M2, that gives way to -5.7% over six months and then steps back up to minus 6.8% over three months. So, we're not able to say that the decline in real balances is tapering off in the monetary union. Credit to residents has its steepest sequential growth rate over three months at -5.9%, compared to -4.9% over 12 months. Private credit posts nearly identical growth numbers to total credit as well as nearly identical trends. Money and credit in the EMU, looked at sequentially, looked at in nominal terms or looked at in real terms, show significant ongoing weakness and possibly stepped-up weakening.