EU Commission Indexes Show Weakening

The EU Commission index for the EMU area fell in December after remaining steady in November and declining in October. November had seen increases in EMU Commission country-level sentiment readings in all but 15 of the 18 early reporters. However, now, in December, the EU country level readings are falling in 13 of 18 early reporters, including in three of the four largest EMU economies.

In December, sector readings show that EMU-wide the industrial readings fell sharply, consumer confidence backtracked as retailing and construction were at unchanged readings month-to-month. Strengthening month-to-month was only the service sector reading.

In terms of standings, the overall EMU standing is at the 24.7 percentile, right at the border of the lower quartile. The industrial sector has a bottom 12.8 percentile standing, with consumer confidence at its 25.4 percentile standing. Services, despite the sector’s rise this month, has only a 35.9 percentile standing. However, retail and construction have standings that are above their respective medians at a 69.4 percentile in retailing and a 72.3 percentile for construction.

Despite bottom quartile consumer confidence standing, retailing has a 69.4 percentile standing. This seems unusual for retailing to hold up so well despite such weak overall sentiment and such weakness in consumer confidence.

Country readings show only five are above their historic medians. Only the small EMU nations Cyprus and Lithuania have sentiment standings above their 70th percentile. In contrast, nine countries have percentile standing below their 30th percentiles – including the EMU overall metric.

Large countries are full participants in the march to weakness. EMU sentiment has a 24.7 percentile standing, with Germany below that at a 12.6 percentile standing, France about the same as the EMU at a 27-percentile standing, and Spain and Italy above the EMU reading.

The table highlights large country results and large country averages with readings weaker than those for the EMU as a whole highlighted in grey. Retailing, services and construction are sectors generally weak in the large economies than in the EMU overall. Italy is an exception.

On balance, Europe is still struggling. Inflation is still too high. But economic results are lagging and now, in December, it may be flagging. This was not the result that November had seemed to portend. But starting a new improving trend is proving to be very difficult and now we ae getting away from the period when interest rates were falling the most and the most widely.

The election of Donald Trump in the U.S. is seeming to have a large impact across the U.S. and even on other countries. I don’t know if there is enough change there to provide any impetus for growth. There is a lot of talk about how Trump is causing a lot of things to change but there is also an expiration of woke mandates. For example, most banks have now pulled out of a financial climate change agreement among Wall Street banks. Depending on where you stand, this is either a bad or a good thing, but it is a change. There is a lot of buzz in the U.S. about Marck Zukerberg dropping fact-checking on Facebook. After meeting with Trump, Justin Trudeau is stepping down in Canada. The press is busy asserting Trump actively plans to all sort of things he has not backed in public. But there is a clear intent to shake things up and see a number of things differently. Will this prove to be pro-growth or not? Whatever it is, it won’t be boring- and the effects are already spreading beyond U.S. borders. Trump may not even be the catalyst but there is widespread global political change in the wake of Covid policies, which could cause a lot of things to change in unexpected ways in the year ahead.