EU Commission Indexes Bounce to End 2023

The EU Commission indexes for the European Monetary Union's (EMU) performance in December show an overall index improving to 96.4 from 94 in November. This continues a string of improvements that has been underway. The improvements run across most sectors although there's more flattening than improving going on – still, that's good news. Compared to September, for example, the overall index is stronger by nearly three points, the industrial index is unchanged, consumer confidence is better by nearly three points, the retail sector is unchanged, and construction is improved by two points, and the services sector is better by three points. These are small changes over a period of three months; still, they represent stability or improvement across the board.

The country level data have been improving as well. In December, only five of the seventeen early reporting countries show deceleration month-to-month. This is the same number as deteriorated for this group in November. However, in October eleven of these seventeen countries showed deterioration.

The rank standings for the industries are dominated by weakness in the industrial sector and consumer confidence. The industrial sector has a 31.2 percentile standing, consumer confidence has a 21.9 percentile standing and these have strong weights to cause the overall index for the EMU to have only a 34.8 percentile standing. This is despite retailing having a 59.4 percentile standing, construction a 74.3 percentile standing, and the services sector at a 55.2 percentile standing. Three of the EMU sector indexes have standings above their medians (rankings above 50%) while two have standings that are weaker than their medians.

Looking at the same statistics for countries, there are only four country standings above their 50th percentiles. All of those are small countries: Greece has a 61.2 percentile standing, Cyprus has a 62.7 percentile standing, Malta has a 60.1 percentile outstanding, and Lithuania has a 56.6 percentile standing. Germany, the largest economy in the monetary union, ranks 14th among the seventeen early-reporting countries, France ranks seventh, Italy 6th, and Spain 5th. Germany and France tend to be two of the strongest economies in the monetary union; however, among the four largest countries they have the weakest percentile standings, with Germany logging a percentile standing at 21% and France at about 35%.

The table below assesses sectors in the four largest monetary union economies. For industry, we see that Germany and Italy have the two weakest percentile standings: in the 20th percentile for Italy and the 24th percentile in Germany. Consumer confidence is weakest in Germany with a 25-percentile standing and strongest in Spain with a 41-percentile standing. Retailing has above median standings in both Italy and Spain while standing at or below the 25th percentile in both Germany and in France. The services sector also has above median standings in Italy and Spain with another very strong standing in Italy, its top 13-percentile historically. Germany and France both have weak standings substantially below their medians. Construction also shows above median results - and quite strong standings especially in Italy and also in Spain – But standings in construction are below their medians in Germany and marginally below the median in France.

The European Commission's rankings in December show that year is ending with a more positive tone, although it's really more of a tone of stability than of improvement. The table on large economy performance shows that Italy and Spain are beginning to show better performance and improvement than Germany and France, the usual two leading economies in the monetary union. Inflation has lingered high in the monetary union and the European Central Bank continues to try to move that inflation rate back down into its target. Monetary policy has not yet turned stimulative, and the ECB is not even talking of that yet. Meanwhile, the global geopolitical situation continues to be dark. The war in Ukraine drags on, with U.S. Congress having a funding impasse that may place more of a burden to continue the war effort in support of Ukraine on the economies in Europe.