Euro Area Sentiment Improving But Still Very Low

June 29, 2009

European Commission June readings for economic sentiment in Euroland recorded a third consecutive improvement, which is the good news.  The bad news is that such have still not recovered to cyclical lows of 1992 and has reversed only about a third of the deterioration that occurred between September 2008 and March 2009.  Moreover, as the display of economic sentiment indices below documents, levels of confidence remain far below 100, which represents the average reading since the beginning of 1990.

  06/09 03/09 09/08 Record Peak
Euroland 73.3 64.6 88.9 117.1
Germany 77.6 77.2 93.6 121.1
France 80.7 73.4 93.5 118.9
Italy 73.3 64.6 88.9 117.1
Spain 77.6 77.2 93.6 121.1


In comparisons of the latest month to last September, confidence in manufacturing, services, and construction exhibit much greater declines than sentiment in the retail sector or among consumers.  The first three components are each about 20 points below September 2008 readings, while the latter two components show net drops of 8 points and 4 points.

Price expectations retain substantial net drops since September, when the indices for sellers and consumers printed at +12 and +17, respectively.  By June, such had swung to sub-zero readings of minus 11 and minus 9, both of which were also lower than readings in March.  Whereas economic sentiment has begun to heal, corroborating other evidence of stabilization such as the purchasing managers indices, deflationary expectations are still getting more pronounced.

Copyright Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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