Source:E.C.

30 AUGUST 2011

Economic confidence in the Euro area took a five point plunge, to 98.3, amid investors fears of a double-dip recession and stock exchanges consecutive mad sessions as too many negative signals wiped out assurance and valuations all together up to August 22nd . Share values melted for 11 consecutive days on major Euro area stock exchanges as well as foreign currency places.

In the EU 27, confidence performed equally poorly with the index down to 97.3 as major heavy economic weights dented the index seriously: Germany's ESI fell nearly six points to 107 and reflected industrialists as well as consumers apprehensions.  Italy's and Spain's nearly froze, stuck around the previous month levels, respectively to 94.1 (from 94.8 points), and to 92.7 points (from 93) while the UK's gauge fell nearly six points to 92.9 points due to the services index plunge into negative territory while simultaneously, the country recorded a four-day riot initiated in London on top of slow growth projections announced by the Bank of England. France's ESI was unavailable due to the summer month.

Except for Slovakia where confidence stayed upbeat and rose nearly three points to 96.5, east European member states reflected a similar dark mood, led by Poland, the largest economy, where the index fell five points to 94.3. In Finland, and Sweden, assurance dipped although modestly while Denmark‘s index slipped six points to 88.1

Industrial confidence consequently turned negative in each the Euro area and the EU 27, respectively to -2.9 points (from 0.9) and to -2.5 points (from 0.1) with Germany, Italy and Spain respective gauges contracting further while inversely the UK‘s index improved to -0.7 points (from -2.2). Better production expectations accounted for this slight uplift, a two point rise to 12.4 while by contrast, export-led Germany slashed expectations by half to 5.4, Italy by  a lesser two points to 6.8 points while Spain's climbed to -1.3 (from -5.7) as new austerity measures destined to tackle the general government debt brought some end to the light of the tunnel while avoiding new drastic public spending cuts.

Order books first positive rise, since March,  into positive territory for UK industrialists, accounted for regained confidence as the country's first export market, the USA, resolved its debt ceiling impasse at the 11th hour on August 2nd. In Germany by contrast, the index fell six points to 8.2 as Euro area debt concerns and financial markets rumors arched over an already stressed environment. Spain's index deteriorated to -29.4 (from -21.3) as debt and default rumors paralyzed potential buyers while Italy's fell three points to -18.1 points upon the new austerity plan announcement (Euro 45 billion two-year tax increases). 

Stocks of finished products nevertheless rose in the Euro area over two fold to 5.1 points and in the EU 27 to 5.9 points (from 4.5) as member states stayed on alert for business prospects without taking the risk of losing out to competition for want of inventory. However, production trends observed in recent months remained  low. On this account, Germany's index moved down to -0.3 points, a first into negative territory while Italy's and Spain's worsened. The UK's index picked up nearly eight points to 22.6.

Export order books fuelled the UK's assurance, up to 0.6 points (from -5.6) an exception throughout the Union, while inversely, Germany's moved down to 2.8 points (from 9.1), Italy's stagnated at -17.2 while Spain's fell further in the red to -21.1  (from -16.3). Finland, Sweden, Denmark fared equally along with Poland and Romania.

Employment expectations therefore declined substantially, down to 1.5 points in the Euro area (from 4.9) and to 2.2 points in the EU 27 (from 3.7). The biggest drop was recorded by Sweden, to 1.4 (from 18) while Slovakia and the UK rose their expectations to new highs, respectively to 13.8 points (from 7.4) and to 7.8 points (from -3.1). Germany's index fell six points to 7.7 but Spain's and Italy's stayed in the red.

Selling price expectations fell consequently as industrialists aimed to keep their respective competitive edge although recent commodity prices dip allowed for elbow room. The Euro area's index fell to 8.7 points (from 12.4) a near four-point drop and equally in the EU 27 to 8.9 points. Spain's index moved down to a minimalist 0.2 points (from 5.1 points), Germany's was slashed to 9.9 (from 15.4), while Italy's stayed cool headed and declined by nearly two points to 8.1 The UK's index rose to 12.1 (from 11.4 points) as a weak GBP currency increased cost in Sterling term while member states overwhelmingly aligned with price cuts policies to fill in order books.