Economy in Brief

Germany's consumer climate measure for November from GfK rose to -18.3 form -21.0 in October. Despite improvement, the index had been as week as -18.6 as recently as August 2024. The climate gauge, despite improving, has a queue standing among all its historic values that places it in the bottom 12% of all past monthly results. The climate gauge is for November while the component values for the index are for October. The components were mixed with the economic expectations gauge weakening while income expectations improved along with the buying propensity index. The components ranked higher than the GfK index, with economic expectations ranked at their 35th percentile; income expectations are nearly neutral, ranked at their 47.5 percentile and the propensity to buy at its 31.9 percentile. Economic reading for the Germany economy has remained weak; Germany's PMI readings have eroded, but slowly, with manufacturing diffusion weak, logging a value of 40 and services just above its neutral level at 50.6. The consumer climate reading ranks as weak and ranked over the last four-and-one-half years. Germany’s manufacturing sector ranks as lower only 8% of the time while service has been weaker only 40% of the time. The economy clearly has a burden of weakness and is not showing much lift or support for the consumer sector. Meanwhile, the ECB’s rate cut process has stalled or at least slowed.

Consumer readings for Europe from fellow EMU members Italy and France as well as for the United Kingdom show weak results. These readings are up to date on the same timeline as GfK components, as of October. All of them weaken by small amounts month-to-month. However, they rank higher than the GfK German climate index. Italy’s consumer confidence measure has a 77.1 percentile standing on the same timeline as Germany’s GfK. France has a 51.5 percentile standing. The U.K. is below its median for that same period with a standing at its 33.2 percentile, in the lower one-third of its queue of data.

The distributive trades survey shows weakening in October for the retail sales (Yr Ago) and sales (time of year). Wholesale sales weakened for sales (Yr Ago) and remained at a very weak reading for orders (Yr Ago) as Sales (time of year) got marginally better in the month-to-month reading but remains at a very weak level.

Expectations for November weakened across the board in retailing compared to October. For wholesaling, they were nearly the same, with the expectations with the net negative readings in November for sales (time of year) that improved compared to October, but it still logged a very weak reading. Improvments month-to-month are a technical assessment, not a statement of an ongoing trend.

Retailing’s reported (current) results log net negative readings for nearly all observations except stocks over the last three months. Retail expectations are the same except their lone positive reading is near-term for October.

Wholesaling reported trends are uniformly deteriorating through time. The negative readings become increasingly weak – or become more severely weak and stay there. Expectations for wholesaling do not follow suit. They are more erratic and cannot be categorized as trending. However, what is disturbing about the expectations is that readings have become suddenly weaker over the last month or last two months in the case of sales (time of year).

Current conditions are generally stronger than their 12-month averages for retailing and weaker for wholesaling. But expectations are strikingly weaker in comparison with their 12-month averages for wholesaling while they are mixed on that comparison for retailing.

There is nothing strong in this month’s survey – not even ‘firm.’ Nothing reassuring. These monthly comparisons of stronger and weaker are only to assess where things are trending – very short term. The readings per se are weak - uniformly weak. All readings rank below their respective 50% mark that designates the location of the median. The strongest reading among activity variables, setting aside stocks, is the October standing of reported orders (compared to a year ago) at 42%. The 29% reading for retailing under expectations also for sales (compared to a year ago) is the next strongest reading.

Expectations are weaker in terms of rankings than the current (reported) readings. The difference is much larger for retailing than for wholesaling. But all the rankings are weak. The chart shows that readings are languishing in a morass of weakness after a post-covid rebound. There is not any clear road to better times ahead here.