07/11/2011: Producer Confidence in EU27, Euro area and Euro area Big 4

In the previous post we looked at the historical (and latest) data for Consumer Confidence in EU27 and the Euro area. This post updates data for Producer Confidence (Industrial Producers segment).

Business Confidence indicator fell from -5.7 in September 2011 to -6.8 in October for EU27. The decline marks continued downward trend with index below zero for the third month in a row. 3mo MA is now at -5.0 against 6mo MA of -2.4. Historical average is at -6.1 against pre-Euro period average of -5.6 and Euro period average of -6.8.

The indicator slipped to -6.6 in October, down from -5.9 in September for Euro area sub-sample. This too was the third consecutive month of index reading below zero. 3mo MA is at -5.1 against 6mo MA of -2.2. Pre-euro period average is -5.6 against post-euro introduction average of -6.2.

The index deteriorated mom in Germany (+1.4 in September to -0.7 in October), and Italy (-9.8 to -10.3) and on both countries 3mo MA is now below 6mo MA. France (-8.3 to -7.6) and Spain (-16.0 to -13.8) saw a slowdown in the rate of decrease in confidence. Both countries also show deeper contractions over 3mo MA than over 6mo MA.

As chart below shows, as with Consumer Confidence, Business Confidence has moved from up-trend over time in the period before the introduction of the Euro to a negative trend since the introduction of the Euro. This effect, however, can be explained by the changes in the economic environments across the entire EU, not just within the Euro area. 

Comparatives for historical averages show that pre-euro period averages were above those attained post-euro introduction in Germany and Italy, virtually unchanged in France and lower in Spain. This is consistent with the long term effects of the construction sector bubble in Spain.

06/11/2011: Consumer Confidence - Euro area and Big 4

Ignored in the hula-balloo of the euro crisis, the real side of the euro area economy is clearly not firing on all cylinders. In particular, the confidence indicators continue to signal underlying structural weaknesses both on the producer and consumer sides.

Here are the latest indices for consumer and producer confidence across the EU and euro area. The present post deals with Consumer Confidence, with subsequent two posts discussing October data for Producer Sentiment and Economic Sentiment.

Overall Consumer Confidence for EU27 has declined from -19.1 in September to -20.2 in October. 3mo MA is now running at -18.7 which is significantly below the 6mo MA of -15.9. Year ago, the index stood at -11.5 against the historical average of -11.1, pre-Euro average of -10.7 and Euro-era average of -11.8.

Euro area Consumer Confidence index stood at -19.9 in October, down from -19.1 in September. 3mo MA in October was -18.5 against 6mo MA of -15.3, so the underlying trend in recent months is down. Historical average ins -12.2 and pre-Euro era average is -11.3 against Euro era average of -13.2.

It is worth noting that the declines between pre-Euro era and Euro era averages in deeper for Euro area countries, strongly suggesting that the introduction of the Euro overall has been associated with an average decline in the consumer sentiment in the Euro area members states that cannot be explained by the variation in consumer sentiment within the overall EU.

Further, per charts above, German Consumer Confidence has fallen from -1.9 in September to -3.3 in October, remaining below zero for the second month in a row. German Consumer Confidence 3mo MA was -1.7 in October against 6 mo MA of +2.6. Historical average is -8.1. Pre-euro era average for Germany is -7.6 against the average of -8.8 for the period following the introduction of the euro. Once again, the swing downward from pre-euro period to post-euro period is larger for Germany than for EU27.

Spanish Consumer Confidence has fallen from -17.0 in September to -19.6 in October, with 3mo MA of -17.9 against the 6mo MA of -15.8. As with Germany, pre-euro period average index reading was -10.9 and post-euro introduction the average is -16.0, showing clearly that introduction of the euro in Spain was not associated with an improvement in consumer sentiment.

France’s Consumer Confidence index continued to signal contraction in demand, albeit at slower pace. October reading came in at -24.3 against -28.4 in September. 3mo MA stands at -26.3 against the 6mo MA of -23.0. France was the only country of the large euro area economies that saw an improvement in consumer sentiment since introduction of the euro: pre-euro period average reading for France was -19.4 against post-euro introduction the average index reading is -17.1.

Italy’s Consumer Confidence had posted a decline from already abysmal -31.1 in September to -33.9 in October. 3mo MA is now at -31.3 against the 6mo MA of -29.0. Just as Spain and Germany, Italy shows signs of decline in consumer confidence since introduction of the euro. Pre-euro period average index reading is -12.9 against a statistically significantly lower post-euro introduction average of -17.1. Of the Euro Big-4 economies, Italian consumers showed the greatest adverse impact of the euro introduction.

Oh, and the thing is… on average, across the Euro area itself, the same problem remains:

As shown above, the trend in consumer confidence over time was up pre-euro introduction. With euro introduction, the trend has been down.

05/11/2011: Jobs destruction in Ireland 2008-2010

So we had the Celtic Tiger, now we are having a Celtic Bust. Our extreme (for a young, small open economy with high levels of tertiary education - in numbers, if not quality - etc). But how do we stack up against other advanced economies in this area?

Here's some data from the OECD covering the period of the crisis (2008-2010, no annual data for 2011 yet) on jobs destruction in Ireland, compared to same in other advanced economies.

For a small economy, even in absolute terms, the number of jobs lost in Ireland in 2008-2010 period was 261,000 or 8th largest loss in the sample of 24 advanced economies. Net of new jobs created (+11,000), Irish economy lost 251,000 (note rounding differences) jobs in the period covered. The net loss we sustained in terms of jobs destruction in absolute terms was the 5th largest in the advanced economies sample.

Chart below puts the above numbers in relative context. As a percentage of total employment, Irish net jobs destruction was 12.2% - second highest after Estonia.

In terms of sectors most severely impacted by losses, Construction leads with 87.8% share of all jobs changes during the crisis. Surprisingly - being the source of so much destruction via Irish domestic banking collapse - Financial Services jobs category posted the shallowest jobs declines at 15.1%. This is most likely due to the lack of layoffs in the state-controlled banking sector, plus the resilience of the IFSC. The only sector that saw increases in jobs numbers is the sector of Community, social and personal services.

05/11/2011: Patents and 'sticky' ROI on academic investment

In the previous post I covered some interesting data on hotspot universities (high impact academic institutions) around the world based on OECD data for 2009. Here is the data on high impact patents (EPO top 1 percent) through 2005 against data for the same through 2000.

About the only interesting trend in the above data, other than the one that reinforces the trends highlighted in the previous post is that there is tremendous 'stickiness' or resilience or historical dependence in the data. In other words, there is a 0.994% positive correlation between past performance in terms of highly cited patents and the later performance.

The above trend is of interest because it suggests that overall, league tables changes are difficult to achieve over the shorter period of time and also that ROI in academic research is itself relatively 'sticky', stretched over time.

The good news is that for the two periods, Irish patents applications have increased from 5 in 1996-2000 to 14 in 2001-2005 - a rise of 180%. The bad news, the average for 36 most advanced economies is 226% improvement over the same period of time.

05/11/2011: Universities & Research: Europe v ROW

OECD recently released an interesting database on research and universities impact for 24 countries. Here are some insights.

First from the top, the US retained its absolutely dominant position in terms of high impact universities. The EU comes in as the second. The relationship between two in terms of specific categories of high impact instituions ('hot-spots') is plotted below:

Aggregating Medicine, Human Sciences and Sciences and plotting them against Social Sciences clearly shows that world-wide (within sample) and even excluding the US, there is a very strong positive correlation between the quality of Science-focused high impact academic centres and Social Sciences centres.

In fact, correlation between Sciences and Social Sciences hot spots numbers is 0.97 for full sample and 0.91 for sub-sample excluding the US. However, excluding UK and US, the correlation drops to 0.59. In my opinion, this strongly suggests that our policies, aiming at focusing in terms of building capacity in 'hard sciences' alone - the EU-wide and certainly Ireland-own agendas for research and development frameworks - is a misguided approach that ignores the important inter-links between two fields.

EU overall results in the charts above are significantly driven by the UK academic performance. Excluding UK from the EU numbers dramatically alters EU standing relative to the US:

Thus, overall, ex-UK, EU falls to the third place in global rankings in terms of hotspots, were it to be ranked as a singular country.

Here are some more detailed plots of sub-indices by more granular division of research areas:

05/11/2011: Profit margins in Ireland: October 2011

Derived profit margins have continued to deteriorate in both manufacturing and services based on my analysis of the PMI data for October.

Per chart below:

• Profit margin conditions in Services sector posted slower rate of deterioration with differential between output and input prices moving to -15.38 in October from -18.52 in September. The differential averaged -17.2 in 12 months through October and -16.2 in 3 months through October. In 3 months through July 2011, the average differential was -17.4 and 2010 average for 3mos through october was -8.1 against 2009 same period reading of -5.6.
• Profit margins in Manufacturing have accelerated downward in October, reaching -10.87 differential against September -9.67. 12mo average through October was -19.6 and 3mo average through October was -13.4 against 3mo average through July of -19.7. 2010 average for 3mos though August was -16.4 and 2009 same period average was -11.5.