Monday, November 7, 2011

07/11/2011: Economic Sentiment in EU27, Euro area and the Big 4

In previous two posts I covered Consumer Confidence and Business Confidence indices for EU27, Euro area and the Big 4 economies. Here's the latests composite indicator for Economic Sentiment.

Overall EU27-wide economic sentiment continued to point South in October with a reading of 93.8 (below 100) coming on foot of 93.9 in September. 3mo MA for the indicator is now at 95.0 against 6mo MA of 98.4, signaling downward trend. The index is now below 100 for three months in a row.

Historical average for the series is at 101.1 against pre-Euro introduction period average of 102.1. Since introduction of the Euro, the index averaged 99.5, well below pre-Euro era average reading.

Euro area own economic sentiment also deteriorated in October to 94.8 against 95.0 in September. The index is now below 100 for three months in a row. 3mo MA at 96.1 below 6mo MA of 99.3 showing downward trend.

Historical average for the index is at 100.8 with the reading of 102.1 for the period prior to Euro introduction and 98.8 for the period since Euro introduction.

Per charts above:

  • Economic Sentiment declined in Germany from 104.9 in September to 104.1 in October, with 3mo MA at 105.3 running behind 108.6 reading for 6mo MA. Before Euro introduction, German Economic Sentiment averaged 103.9 and since Euro introduction the average is at 98.1.
  • Economic Sentiment fell (slightly) in Spain from 90.9 in September to 90.8 in October, remaining below 100 for every month since August 2007. 3mo MA is at 91.5 against 6mo MA of 92.6, so contraction in the sentiment continues to accelerate. Pre-euro period average for Spain is at 101.9 and since introduction of the Euro the index averaged only 98.6.
  • Economic Sentiment bounced back to slower rate of decline in France rising from 96.0 in September to 97.2 in October. The index remains below 100 for 3 consecutive months. 3mo MA is now at 97.6 against 6mo MA of 101.2. France is the only country which saw improvement in the Economic Sentiment since introduction of the Euro. Pre-euro period average is at 99.4 against Euro period average of 101.8.
  • Italian economic Sentiment has bounced slightly from 89.0 in September to 89.3 in October showing a slowdown in the overall rate of decline. 3m MA is at 90.8 and 6mo MA is at 93.3, with 6 consecutive months of sub-100 readings. Prior to introduction of the Euro, the index averaged 101.5 and since introduction of the Euro, the average is 99.3.

As shown in the chart below, shallow positive trend in the Economic Sentiment index during the years prior to Euro introduction has been replaced by a negative trend since introduction of the common currency.
Furthermore, the rate of decline in the averages between pre-Euro and post-Euro introduction periods is steeper in the Euro area than in the overall EU27, suggesting that the Euro was not conducive to improvements in overall Economic Sentiment.

1 comment:

Dumitrascuta said...

Interesting article. With a struggling Euro and ever mounting pressure from the PIIGS all I can see is that there is still further room for economic sentiment to deteriorate. Even Germany and France, the two powerhouses of Europe are slowing up and really, Italy and Greece are acting as a scarecrow for the Eurozone and World Global Markets as a whole.