28/01/2011: Eurcoin January 2011

The latest Eurocoin leading indicator for growth in the Eurozone is out and it is a mixed bag.

From the headline figure level, Eurocoin declined marginally from 0.49 in December to 0.48% in January. Both levels are largely consistent with 2% annualized rate of growth. This, of course is an improvement on Q3 2010 and suggests that growth remains relatively robust (by Euro area standards).
However, a worrisome feature of the latest reading is that it was supported by the confidence surveys, rather than by the real activity.

Industrial production growth rate remained basically constant across the Euroarea in the latest data (up to November 2010 and for the three consecutive months), driven by stable growth in German production, decline in Spain and stagnant Italian production. France posted a slight increase.

Business confidence as measured by the EU Commission surveys boomed in Germany and posted a robust rise in France, slightly offset by negative, but negligibly slowing confidence in Italy and the robust negativity in Spain. This marked the fifth consecutive month of business confidence moving well above the PMI-signaled confidence indicators.

In contrast, consumers were getting gloomier in France, Spain and Italy, while showing robust optimism in Germany.

So overall, a mixed bag, with leading growth indicator signaling growth slightly ahead of the IMF forecasts. Which means I am now leaning toward seeing 0.48-0.5% qoq growth in Q1 2011 - annualized rate of 2.00-2.01%