Source:E.C.

10 JANUARY 2012

Economic Confidence in the Euro area stayed mostly unchanged, down a few notches to 93.3 points from the previous month gauge as the European Central Bank's (ECB) liquidity operations and extended loans to banks, as well as strong US data, offset lower economic growth concerns and sovereign credit ratings downgrades warnings. As a result, the region's heavy economic weights assurance stayed on course, although unevenly: France's index stabilized as domestic banks recapitalization obligation was revised down by the European Banking Authority (EBA) compared with the October preliminary results, the Euro's lower foreign exchange rate at USD 1.31 opened up export markets, and imported raw materials prices kept declining. In Germany, the index rose one point to 105 as extra-European Union (EU) markets signaled an upturn. Spain's index by contrast contracted by nearly two points to 89.7 as austerity measures dented industrial prospects further while domestic consumption neared rock bottom level. In Italy, a similar scenario unfolded and dragged down the index by nearly five points to 85.5 while in the UK, a non-Euro area country but one of Europe's five largest economies, confidence inched down by half a point to 88.4 despite major concerns over potential isolation, following the  British Prime Minister's refusal to join the December EU Summit fiscal rules agreement. 

Dynamic Nordic states assurance proved uneven as well unlike previous months especially in Finland, a Euro area country, where the index fell nearly three points to 94.3. In Sweden and in Denmark by contrast, economic confidence was mostly stable due to lesser direct concerns over the single currency region's sustainability.

East European member states by contrast, more dependent on the EU's economic momentum for the manufacturing of automobiles and transport equipment, translated their apprehension of a sharp economic drop by sending down their respective indices substantially. In Poland, the largest economy, the index fell five points to 88.5. Romania's dipped two points to 90.8 and equally in the Czech Republic to 86.4 points.

Export order books accounted for the Euro area's mood, but the index remained in negative territory at -14.1 points (from -15.7). France's index climbed over four points to -14 while Germany's was more subdued and rose to -2.9 points (from -3.3). Spain's index stayed at ground level to -27.3 points (from -23.6) and equally in Italy. The UK's industrialists translated pessimism in relation with the country's opt-out choice and potential market share losses as the index plunged over eight points to -34.1. Except for Poland where the index rose a modest two points to -50.8, neighboring countries indices dipped. Among Nordic states, Sweden's index jumped nearly twofold to -13.7 points while Finland's and Denmark's gauges stayed linear, up one point each.   

Thus, industrial confidence was resilient in the Euro area where the index froze at -7.1 points equally to the previous month although the region's chaotic debt crisis blocked long-term perspectives. France's index fell one point to -10.3 while Germany's inched down into negative territory for the second consecutive month and landed at -0.9 points. Spain's index fell two points to -18.8 and Italy's to -11.3. In the UK, the index moved down by half a point to -13. Poland, and the Czech Republic performed equally while Romania's gauge recorded a four point slide to -3.6 points, a first into the red. Finland stayed tuned to the Euro area's unresolved crisis and sent its own index down nearly three points to -10.3 while inversely Sweden's industrial confidence,  prudently rose half a point to -10.7. Denmark by contrast stayed upbeat as industrial confidence increased nearly three points to 4.8.

Higher production expectations in the Euro area accounted for the region's general mood as the index turned positive to 1.9 points (from -0.4 points in November) boosted by export markets positive data, such as the USA‘s labor market improvement and housing starts pick-up. France index rose to 1.5 points (from -0.4 equally to the region's) and Germany's climbed over two points to 3.3 Spain's index also climbed over two percentage points to -4.9 (from -7) while inversely Italy's dipped to 0.3 points (from 1.7). The UK's gauge rose twofold to -1.3 points.  Romania, Poland and the Czech Republic performed inversely and slashed their expectations by half as heavy players economic rebound regularly originates from Capital Goods (aerospace-railway-boats and motorcycle equipment) rather than the automobile industry alone. Finland's index took a dive to -2.1 points (from 8.5 points) while Sweden's and Denmark's surged respectively by six points and a 11 point leap.

Order books in the Euro area proved irrelevant to industrialists resilience as the index took a two-point drop to -15.7 points pushed down by France's seven-point plunge to -17.8, Germany's dip to nil, along with Spain's and Italy's at near-abyssal levels. The UK fared equally by pushing down the index five points to -22.3. Eastern Europe major economies mirrored this trend and Nordic states, with the exception of Finland, sent their indices down by two points on average. Stocks of finished products were consequently stable in the single currency region as well as in neighboring eastern and northern countries since production trends in recent months were deemed negative, at -6.1 points in the Euro area and in negative territory for Europe's five, except in Germany where the index jumped to 2.1 points (from -6.5 in November).

Employment expectations therefore contracted further in the Euro area, down to -5.2 points (from -3) in view of the labor market successive deterioration due to austerity measures throughout the Union, weak internal demand and consequently, industries over production capacities. Therefore, selling price expectations in the Euro area stayed stable, a reality forced onto businesses so as keep market shares afloat.