EU Indexes Continue Their Descent

The EU sentiment indexes for the EMU in August fell to 93.3 from 94.5 in July, continuing a steady decline as depicted in the chart. Industrial reading eroded, consumer confidence eroded, construction eroded and services eroded; only the retail reading at -5 was unchanged on a month-to-month basis. The percentile standing with the overall index is at its 24.2 percentile, putting it in the lower quartile of its queue of values. The industrial EMU readings are in the bottom 26-percentile, consumer confidence is in its bottom 19th percentile and services are in the lower 34th percentile of their historic queue. And the two readings stand above their respective medians, retailing at its 62nd percentile reading and construction at its 72nd percentile reading.

Across countries Percentile standings across the monetary union are weak with only three countries Greece, Malta, and Cyprus - all of them small economies- sporting EU index values above their respective historic medians (above a 50-percentiel standing). In August, there are declines in eight of the reporting 18 monetary union members. However, the three largest economies in the monetary union, Germany France, and Italy, each experienced sharp declines in August. Germany posted a decline of 2.6% on the month, France, a decline of 2.7%, and Italy dropped 1.1%. The fourth largest economy in the monetary union, Spain, posted its second monthly increase in a row, rising by 1.5% in August. But among the countries that saw declines, most of them were quite severe declines as we can see in the table below. Portugal saw a drop of 3.4% month-to-month, Austria logged a drop of 4.6%, Malta fell by 4.8%, and Belgium fell by 1.2%. Among all the negative month-to-month values, only Lithuania had a modest decline of 0.2%.

Weakness in August is concentrated in the largest EMU economies Across the four largest EMU economies, the percentile standings for the industrial sectors in each are below their respective medians with the strongest standing in Spain at a 40.6 percentile. Germany and France each log weak 19th percentile standings. Consumer confidence also is below its median value in the largest four countries with the strongest reading in Spain at a 43-percentile standing and the weakest standing in Germany at a 23-percentile standing. The service sector has a below median standing in Germany and France, compared to a relatively strong 82nd percentile standing in Italy. Retailing has a 24.5 percentile standing in Germany. Above median standings are in the three other large countries with Italy having an 87.7 percentile standing. Construction is at below median in Germany at a 36-percentile standing. It is above median in the other three countries with the strong 96.8 percentile standing in Italy. Italy consistently logs firm to strong readings and is as strong as any other large EMU economy.