Danish Confidence Continues Its Lull

Danish confidence continues to post negative values in July. The July confidence reading is slightly worse than in June, but its negative reading is not as deeply negative as in May, although it comes in right on its three-month average. Sequentially the average readings for Danish confidence are improving from -23.5 on its 12-month average of a year ago, to a -8.9 average over the most recent 12 months, to a -6.7 average over the recent six months, and to average -5.4 over the last three months.

Danish trend The chart shows a relatively rapid improvement in confidence from late-2022 to mid-2023. Since then, the improving gradient has been less steep but still shows steady, if not monotonic, improvement. This month’s backtracking is not unusual as there have been five monthly backtracks over the last 12 months even as the index improved by 4.7 points on balance, an average monthly gain of about 0.4 points per month. This is normal volatility, not at all unusual.

The chart also plots the Danish figure against the Sentix gauge for the EMU. That relationship shows a tracking of Denmark with the Sentix gauge, with Sentix being the more volatile reading. Currently both Denmark and Sentix are on improving trends and each have negative readings.

Environmental standings The Danish data show readings for confidence and a separate set of readings pertaining to the environment. The environmental readings are mostly higher than the percentile standings of other conditions and their future values except for inflation. Inflation expectations in Denmark are still elevated.

Notably the environment shows standings for most environmental variables in their mid- to upper-fiftieth percentiles leaving the rankings moderately above their period medians (medians occur at a rank of 50). The exception here is a weak 17.3 percentile standing for the favorability of the time to purchase, but that improves to a 57-percentile standing on the outlook for the next 12 months.

Confidence Consumer confidence itself has a ranking at its 16th percentile with weaker readings for the 12-month outlook that for the last 12-months for the components ‘financial situation’ as well as for the ‘general economy.’ The outlook standings for these two components have values in the 7th percentile (Financial Situation) to the nearly 18th percentile (General Economy), both quite weak.

The unemployment trend for the next 12 months has been fluctuating at a value of +7. That has a 65.5 percentile standing. That puts expectations for unemployment moderately above its historic median, which is slightly uncomfortable.

Inflation expectations are lower on the outlook than the look-back over 12 months, but both have elevated standings with the backward-looking standing at 87.6% and the outlook still high at 70.9%.

All this leaves Denmark in a moderately improving trend profile although with some question marks. The relatively lower standing of the outlook for financial conditions and the general economy reflects readings that have been little-changed over the past year. Both metrics run significantly below their respective pre-Covid markers, but neither is showing a trend to further deterioration.

The tracking with the Sentix index suggests that Denmark will go the way that the EMU goes. The jury is still out on that, but expectations are that growth in the EMU is doing well enough and that inflation progress will allow the ECB to cut rates ahead perhaps as soon as September.