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.