EU and Euro Area Show Some Improvement in April

The EU Commission Indices for the EU and EMU showed gains in April. The EU index rose to 105.1 this month from 104.6 in March; the EMU index rose by 0.9% reversing its 0.9% drop last month. The EU index sits in the 60.7 percentile of its historic queue of data about the same position as the EMU index (60.1% level). These are moderate standings, not strong but not in any risk of showing negative growth. The 50th percentile is where each series' median lies, so both of these readings are above their respective medians.

The EU-wide readings for the industrial sector (see table) improved slightly to -3.8 in April from -3.9 in March to post a 52.8 percentile queue standing. Consumer confidence also improved, rising to -6.8 from -7.3 to a 74.8 percentile standing near the upper quartiles of its queue of historic observations. Retailing slipped, falling to 2 from 4.5 to mark an 87.4 percentile standing. Retail sales have been fueling growth in the EU/EMU regions. Construction also improved very modestly, rising to -16 from -17 to a 54.5 percentile queue standing EU-wide. The services sector moved higher, rising to 10.9 from 9. That brings services to a 75.7 percentile standing. It is the highest service sector reading since January.

On balance, the EU/EMU regions show some very modest improvement on the month across a broad array of sectors and measures. Still, the overwhelming assessment is that of ongoing moderation.

Of the 16 early reporting EMU countries, only four showed a decline in their economic sentiment gauges in April. Those were France, Spain, Finland and Slovakia.

The strongest monthly gains came in Luxembourg at 5%, Italy at 4.2% and Cyprus at 4.0%. After that group, the largest monthly gain was in Malta at 2.7% and so on. Seven of 16 EMU members show back-to-back monthly gains in their sentiment indicators in March and in April. Only France and Spain show back-to-back declines, but they are the second and fourth largest EMU member economies, respectively.

There are eight reporters with EU sentiment gauges in the top 40th percentile of their respective historic queues (standings in the 60th percentile or higher) with only five in the lower 40% of their historic queues.

For the EMU industrial sector was unchanged with a sector reading of -4, the same as it has been for three-month running. That has a 58th percentile standing. The big four EMU economies Germany, France, Italy and Spain have queue standings ranging from 67% (Spain) to 52% (Italy).

Consumer confidence among EMU members rose in April to -9.3 from -9.7. Still, apart from March 2016, it is the worst confidence reading since December 2014. EMU confidence sits in its 71st queue percentile led -oddly- by Italy at its 89th percentile and lagged by France at its 53rd percentile among the big four economies.

Retailing is the leading sector by queue standing in the EMU even though it stepped down to a reading of 1 in April from 2 in March. It has a 92.5 percentile standing with elevated readings for all of the big four economies led by Spain's 94th percentile standing and lagged by France with a still not shabby 73.9 percentile standing. Retailing has been a bright spot in the EMU.

The services sector in the EMU has been an important source of strength and it advanced by 2 points in April to a reading of 12. That reading has an 80.5% queue standing for the EMU. Services are rated mostly highly in Italy (91.9%) and lag the most in France (50.5%). On its internal metrics, the weakest component for services this month is expected demand with a 55th percentile standing. That may be something to watch. The weakness in the industrial sector has been weighing down services which have showed clearer erosion in terms of the PMI formats than in the EU Commission format.

The construction sector is smaller and more idiosyncratic. It advanced in April, rising in the EMU to -19 from -21 to a percentile standing of just 49.8%, the only sector below its historic median. Activity relative to the past trend is weak in this report. By country, Germany has the highest sector relative position with a 95th percentile standing while France is weakest among the big four economies with a 23rd percentile standing. Germany's sector is benefiting from expenditures to house migrants.

On balance, the EU Commission indices for the EU and EMU show some progress in April but not much of it. Conditions are somewhat less varied within the EMU as only four EMU nations show sentiment declines in April; that's a relatively low monthly count. This month shows the most countries with sentiment advancing month-to-month in the last 12 months, although that optimism is confined to the month and not part of a trend. The broader trends are still lower, if mildly so, transitioning from peak readings late in 2015.