26/09/2011: French and German indices signal continued slowdown in September

This week's early trickle of data is continuing to signal ongoing process of deteriorating macroeconomic conditions in core euro area economies.

According to the latest reports, Portugal's economy is likely to post 2.3% decline in GDP in 2012 (revised from 1.8% decline forecast earlier) and shrink 1.8% in 2011 - an improved estimate on 2.2% contraction predicted in Q1 2011 (the swing in 2011 is due to strong H1 2011, while the swing in 2012 forecast is due to weak expectations for H2 2011 and after).

France's MNI survey of economic forecasts (here) are coming in weaker by the week. For previous week, median forecasts were for

• Manufacturing PMI at 48.2 down from 49.1 a week before, both below growth line of 50;
• Services PMI at 54.4 down from 56.8, above the growth line, but slowing

Confirming these, Insee Index of Business Climate posted the first below 100 reading since June 2010, coming in at 97 in September, down from 101 in August. 3mo average through September is now at 101 against the previous 3mo period average of 108. Year on year, index is down 5 points. Just as with German data below, the latest result marks the third month of continued declines.


And today, German Ifo index came with further downgrades to business expectations and conditions. Here's the chart:

• Business climate assessment came in at 107.5, above expansion line, but down for the third month in a row. 3mo average through September is now at 109.7 down from previous 3mo average (through June) at 114.3. Year on year the index is down 3.7 points.
• Business situation sub-index came in at 117.9, down from 118.1 in August, marking 3rd month of continued declines. Q2 average is 121.9 and Q3 2011 average is now at 119.1.
• Business expectations sub-index has hit contraction territory at 98.0 against August reading of 100.1. Q2 2011 expectations average was 107.1, while Q3 2011 average is 101.0. Year on year September 2011 reading is down 9.9 points.
  

25/08/2011: German Index of Business Climate post another sharp contraction in August

Germany's Ifo index of business climate posted another large-scale contraction in August according to the latest reports.

• Index of Business Climate now stands at 108.7 (still in the expansionary territory), down from 112.9 in July. 2Q 2011 average for the index is 114.3 and 3Q 2011 (to-date) average is now at 110.8. Year on year, Business Climate index is down 2.4 points. This is the second consecutive monthly contraction.
  
• Business Situation index also registered a contraction to 118.1 in August from 121.4 in July - a second monthly contraction in a row.
  
• Index of Business Expectations fell precipitously, reaching 100.1 in August, down from 105.0 in July, marking the 6th consecutive month of declines. Index average for 2Q 2011 is 107.1 and 3Q 2011 (to-date) average is 102.6. Business Expectations are now down 8.9 points on August 2010.

All-in the latest reading continues to signal rapid slowdown in business activity, although the levels of the index remain in expansion territory.

16/08/2011: Euro area and German growth Q2 2011

Two quick updates on some economic data released today.

Germany posted virtually zero rate of growth with GDP in Q2 2011 adjusted for seasonal effects up just 0.1 percent on Q1 2011. Q1 2011 quarterly growth rate was revised to 1.3 percent. German GDP growth was 2.6% yoy in Q2 2011, down from 4.6% in Q1 2011.

France data released last week showed economy stagnated in the three months through June with zero growth rate qoq and 1.6% growth rate yoy in Q2 2011, down from 2.1% expansion in Q1 2011. Italy reported data on August 5th showing its GDP growing 0.3% qoq in Q2 2011, 0.8% yoy, down from 1.0% yoy growth in Q1 2011. Spain’s economy expanded by just 0.2 percent in Q2 2011 (qoq) and 0.7% yoy, against 0.8% expansion in Q1.

And so on... until eurostat posted euro area-wide growth rate of 0.2% qoq in Q2 2011, down from 0.8% qoq in Q1 2011. Year on year growth rate fell to 1.7% in Q2 2011 from 2.5% in Q1 2011. Exactly the same growth rates were recorded in EU27, showing that the ongoing slowdown is now spreading across non-euro area member states as well. The EU27 and the euro area growth rates are now below those in the US (+0.3% qoq).

Summary table courtesy of the eurostat:

The overall disappointing growth in the euro area was entirely predictable, given that the leading indicators were pointing to it for some time now (see here), the industrial output data (here), etc.

However, here's an interesting chart suggesting that months ahead are not going to be easy for German economy:
Pay especially close attention to the yellow line showing business expectations for economic activity in months ahead. The data above is through July 2011, the latest we have and it firmly shows that business expectations have now dropped to the lowest level since January 2010, marking as fifth month of consecutive declines. The index stood at 105.0 in July 2011, down from the Q1 2011 average of 110.1 and Q2 2011 average of 107.1.

Euroarea leading economic indicator is now slipping since the beginning of July and this confirms continued weakness in the growth series.

12/08/2011: Industrial Output - Euro area June 2011

European industrial production indices released today show that through June 2011, core Euro area economies have slowed down significantly their industrial and manufacturing output growth. This outcome, well flagged earlier by PMIs and eurocoin leading indicator of economic activity, implies that in all likelihood, Euro area growth for Q3 2011 is going to show if not an outright contraction, at the very least flat-line performance.

For Ireland (we have data through July now - see PMI data analysis for manufacturing and services, plus additional analysis of exporting activity and industrial turnover and volumes) this trend is now fully established with either contraction signals remaining persistent over recent months or flat-line trend being established on more volatile industrial production data for some 12 months now.

But what about the rest of the EU and the Euro area? Here is the data.

Industrial production index showed a decline from 101.63 in May to 100.94 in June for the first time since September 2010 (against 2008 average of 106.6, 2009 average of 90.88, 2010 average of 97.66 and 2011 average to-date of 101.18) driven, primarily by:

• Germany index falling from 111.7 in May to 110.8 in June, with current 2011 average to-date standing at 110.37, up on 2010 average of 103.48, 2009 average of 93.46, but below 2008 average of 111.73
• Greece contracting from already recessionary 75.68 in May to 74.02 in June - the worst performance since 1994 when the series began
• Spain posted a decline from 84.97 to 84.26 between May and June this year. This compares poorly against the running average for 2011 to-date of 84.87, 2010 average of 84.68 and 2008 average of 99.55. However, the index is still above 2009 average of 83.97
• France also recorded a decline in industrial activity from 94.80 in may to 93.20 in June with current average for 2011 to-date standing at 93.93, ahead of 2010 level of 91.49 and 2009 level of 86.95, but below 2008 average of 99.40.
• Italy recorded a decline from 90.00 in May to 89.5 in June with current 2011 average to-date remaining ahead of 2009 and 2010 averages, but well below 2008 average of 102.00
• Netherlands, Denmark, Portugal and Finland showed declines in their indices in June
• Ireland and the UK were the two countries in the series to show an increase in the index, while Belgium, Austria and Sweden did not report data for June.
• Poland showed a slowdown in the sector from 143.7 in May to 140.6 in June with current 2011 average to-date standing at 140.77, still significantly up on 2010, 2009 and 2008 averages
• The UK posted a marginal increase in the index from 89.57 in may to 89.58 in June with current 2011 to-date average running at 90.09 - ahead of 2010 average of 89.99 (marginally) and 2009 average of 87.74, but below 2008 average of 97.58.

Charts to illustrate (note: SOEs refers to Small Open Economies):

On Manufacturing side: Denmark, Germany, Greece, Spain, France, Italy, the Netherlands, Poland, Portugal, Finland and the UK all showed declines in output activity. Only Ireland posted a rise in June.
Euro area manufacturing activity overall fell from 102.76 in May to 101.67 in June and is now below 2011 average to-date of 102.32, although still running ahead of the annual averages for 2009 and 2010. 2008 annual average was 107.27, well ahead of the activity levels to-date.

New orders also came in disturbingly lower at 104.64 in June down from 105.74 in May. New orders index now running below its 2011 to-date average of 104.77 and below 2008 average of 110.09, thaough still well-ahead of 2010 and 2009 averages.
Again, as before, new orders fell in Denmark, Germany, Greece, Spain, France, the Netherlands, Poland, Portugal, Finland and the UK. The New Orders sub-index rose in June in Ireland and Italy.

Capital goods production declined significantly in the Euro area from 107.05 in may to 105.5 in June and now stands below 105.55 running 2011 average to-date, ahead of 2009 and 2010 averages, but below 2008 average of 113.52.
In terms of individual countries, capital goods output fell in Denmark, Germany, Ireland, Greece, Spain, France, the Netherlands, Poland and Portugal. Output rose in Italy, Finland and the UK.