Recent data on the activity front have been mixed. GDP growth eased in Q3 (0.1% q/q after 0.3% q/q) and the composite PMI for the Eurozone slightly declined in November (to 51.5) for the second month in a row. Survey data from the European Commission send a more positive message. Indeed, the European Commission Economic Sentiment Indicator (ESI) kept on improving in November. The index came in at 98.5, 0.8 pt above October’s reading, and now pretty close to its long term average.
Admittedly, the pace of improvement has clearly decelerated over the last few months. ESI rose by 3 points over the last three months (from August to November), nearly half the increase observed during the previous three months (5.8 pts from May to August).
Other details of the survey are more positive. Indeed, the improvement has been widespread among the Eurozone: +0.8 pt in Germany and even +1.9 pts in Italy, +1.4 pts in Spain and +1.3 pts in the Netherlands. The overall increase in the Eurozone was curbed by an exception française, where the index fell 0.9 pt.
The breakdown by sectors shows that confidence in services (+2.9 pts) and, to a lesser extent in industry (+1.1 pts) recorded strong improvements, which is, in our view, a sign that the cyclical recovery is still gaining traction. In these sectors, balances of opinion regarding both future and past activity were on the upside. The weakness of the overall index came from poor evolution of confidence in retail trade and construction and among consumers over the last two months. Indeed, and as long as growth will not have accelerated enough to drive unemployment down, the consumer outlook will remain a drag on the improvement of confidence.
Tomorrow Eurostat will release its inflation flash estimate, which we expect slightly on the upside, but still below 1% y/y in November. A week ahead of the next ECB Governing Council’s meeting, data still point to a weak recovery, for which any available support would be welcome.
BY Frédérique CERISIER
To Read the Entire Report Please Click on the pdf File Below.
Admittedly, the pace of improvement has clearly decelerated over the last few months. ESI rose by 3 points over the last three months (from August to November), nearly half the increase observed during the previous three months (5.8 pts from May to August).
Other details of the survey are more positive. Indeed, the improvement has been widespread among the Eurozone: +0.8 pt in Germany and even +1.9 pts in Italy, +1.4 pts in Spain and +1.3 pts in the Netherlands. The overall increase in the Eurozone was curbed by an exception française, where the index fell 0.9 pt.
The breakdown by sectors shows that confidence in services (+2.9 pts) and, to a lesser extent in industry (+1.1 pts) recorded strong improvements, which is, in our view, a sign that the cyclical recovery is still gaining traction. In these sectors, balances of opinion regarding both future and past activity were on the upside. The weakness of the overall index came from poor evolution of confidence in retail trade and construction and among consumers over the last two months. Indeed, and as long as growth will not have accelerated enough to drive unemployment down, the consumer outlook will remain a drag on the improvement of confidence.
Tomorrow Eurostat will release its inflation flash estimate, which we expect slightly on the upside, but still below 1% y/y in November. A week ahead of the next ECB Governing Council’s meeting, data still point to a weak recovery, for which any available support would be welcome.
BY Frédérique CERISIER
To Read the Entire Report Please Click on the pdf File Below.