EU Indexes Show Steady Ordered Performance with Some Improvement

It still seems unusual to look at a plot of the EU Commission indexes for Italy, France, Germany, and the European Monetary Union to see Italy consistently showing the best top-line reading and Germany consistently showing the worst bottom-line reading. If you want to make it more confusing, we could put Spain on the chart and Spain would emerge as even stronger than Italy. Clearly the post COVID and post Russian-Ukraine war environment has turned what used to be the global economic order on its head.

If we evaluate the big four Monetary Union economies by their queue standings on data back to 1990m Spain has the strongest standing and is healthy country with the standing above its median on the period with the 64.9 percentile standing. France is next at a 48.6 percentile standing, followed by Italy at 41.7% and Germany at a very weak 18.8%. The Monetary Union has a 36.8 percentile standing. Among the 18 early reporting countries, only 5 have percentile standings above the 50% mark which puts them above their historic medians for this timeline.

The Monetary Union in August saw an improvement in its overall index to 96.6 in August from 96.0 in July; however, this is still a weak, 36.8 percentile standing. In August, there is an improvement in retailing as the index rose to -8 from -9 in July and an improvement in services where the services diffusion reading rose to +6 from +5. However, construction deteriorated to -7 in August from -6 in July and consumer confidence backtracked to -13.5 from -13, while the industrial sector remained at -10.0 for a number of months running. As far as sector rankings are concerned, construction has a 67.4 percentile standing, retailing has a 50.1 percentile standing - barely above its historic median which occurs at a ranking of 50. Services, consumer confidence, and the industrial gauge all have rankings below 50; in fact, all of them except services are below the one-third standing mark and their ordered queue of rankings of data back to 1990. Services aren't far from that, however, with the 36.3 percentile standing.

The small table below provides several different assessments to compare the four largest economies in the Monetary Union with one another and with the overall EMU standard. At the bottom, we use both an unweighted average of the four countries as well as a GDP weighted average for the four and a weighting scheme - as you can see weighting makes some difference. The table immediately shows you that the construction sector is above its median in all the countries; construction has fared well during this period. Spain has both the highest EMU sentiment reading as well as sector rankings above 50% for all sectors except confidence. Italy shows sector rankings above 50% (above the sector’s respective medians) except in consumer confidence and for its industrial gauge. In contrast, France has an above-50-percentile standing for industry and for construction only. Germany has an above-50-percentile standing only for the construction sector with extremely weak rankings/readings for both industry and services. The large countries in the European Monetary Union are far from having escaped the worst of it, and many cases seem to have gotten the worst of it. Germany’s sentiment gauge has an 18.8 percentile standing, well below the standing for the community at 36.8%, while the other three large economy have rankings that are stronger than the rankings for the community.

Looking indicator-by-indicator, we find that Germany has a weaker industry ranking than the European Monetary Union as a whole. Italy has their ranking like the EMU ranking while France and Spain have superior rankings to the community. For consumer confidence, Germany and Spain have readings that are stronger than for the community while France and Italy have slightly weaker readings than the EMU. Retailing is stronger than the community as a whole and quite strong in absolute terms in Italy and Spain, but Germany and France fall well below the ranking for retailing in the EMU. The services sector is better in Italy and in Spain than in the EMU and worse off in France and in Germany. Construction is strong and well above community rankings in Italy and Spain; it's weaker than community standards in Germany and France. The overall gauge, however, finds each of the BIG4 economies with rankings superior to the ranking of the European Monetary Union except for Germany whose ranking is closer to half that of the community!

Among the 18 early reporting economies, 7 registered declines in their overall country level indexes in August; this is an improvement from 10 showing declines in July and 11 showing declines in June. Among the BIG4 economies Germany and Italy showed declines in August with France and Spain showing increases and France showing a substantial increase. This compares to July when only France declined and to June when three of the four largest economies declined with Spain as an exception.

Nearly all the reporters in the table and all the sectors show a weaker reading in August 2024 than they had in January 2020 before COVID struck; the sole exception to this is Spain, whose reading is 4 points higher than it was in January 2020. EMU snows some improvement in August, but it is still a very slow progression.