Source: E.C.

4 OCTOBER 2011

Economic confidence in the Euro area deteriorated for the third consecutive month and fell nearly three and a half points to 95, equally to the UE 27, to 94 points, the region's fourth uninterrupted decline as recession fears, endless warnings about the Union's incapacity to move swiftly on Greece's woes, and the International Monetary Fund's assertion over European banks fragility left investors num.

France's gauge mirrored the Euro area's lack of economic assurance and dipped to 96.2 points as consumer indices along with retail and construction stayed in negative territory. Germany fared equally although confidence stayed afloat by dropping two points to 104.9. In Italy and Spain, the area's third and fourth economic weights, additional austerity measures dented assurance further and general strikes summed up nationals state of minds over hard times and lack of future prospects: Italy's index  slumped five points to 89 while Spain's fell nearly two points  to 90.9. In the UK, economic assurance dipped equally to the Euro area's and landed at 89.5 points as the services index remained the sole gauge on the rise. Nordic states reflected a similar downbeat mood, Finland and Sweden shed on average four points off their respective indices while Denmark's economic confidence index dived ten points to 89.5.

East European member states followed the overall negative trend with Poland, the largest economy, Slovakia and Romania recording over two point drops on average.

Industrial confidence in the Union consequently took a further dip into negative territory, -5.7 points (from -2.4 points in August) and in the Euro area to similar grounds (-5.9 points compared with -2.7 in August). France's index fell twofold to -8.2 points, Germany's dipped over three points to 1.4, while Italy‘s slouched to -9.8 points (from -4.8) due to the €54 billion fiscal adjustment austerity plan voted by Parliament. Spain's gauge decreased by two points to -16. In the UK, the index dived to -6.8 point (from -0.7) and recorded its biggest drop since last October. Out of Nordic states, Finland and Sweden stayed in negative territory and shed on average two points while Denmark's industrial sentiment dropped to nil (from 3.5 points in August). Poland's index fell nearly two points to -15.7, and Slovakia entered negative territory to -1.6 points (from 3.6 points in August) while the Czech Republic stayed afloat at 1.1 points (from 2.9 in August).

Bailed-out member states lack of industrial confidence worsened leaving Greece's index to drop to -23.9 points (from -19.3) and Portugal's to -23.7 points (from -18.7). Figures were unavailable for Ireland.

In such context, production expectations melted: the Euro area's slumped to 0.2 points (from 5.9 in August) and the Union's dropped over five points to 2.4
France's index dived to 2.2 points (from 11.6), Germany's declined to 1.1 points (from 5.4) while Italy's and Spain's respective expectations fell over five points. In the UK, the index declined by over five points as well, to 7.8

Dependent on western Europe as major manufactured products partners, the Czech Republic and Slovakia recorded substantial declines, respectively a six point drop to 7.7 and a more drastic 19 point fall to 13.7. By contrast, Latvia, Lithuania, and Romania shed on average under one point unlike Poland where the index  dipped by half to 3.1 points.

Nordic states, a reliable barometer, stayed more cool headed : expectations in Sweden shed less that one point and in Finland jumped over five points to 6.5 as its non Euro area neighbor and economic partner kept momentum. Denmark's index took a pause from the previous month leap and soft landed at 14.2 points (from 19.5 in August).

Order books indices nevertheless waned further in the Union, over a two point drop to -12.3  and equally in the Euro area to -11.8 points. France's index contracted by three points to -15.9 as transport equipment, its lead product, recorded lesser demand although other transport equipment (mainly railway, aerospace, boats and motorcycles) stayed on the increase. In Germany, the index fell to 5.8 (from 8.2 points in August) but in Spain and Italy, deteriorated further. In the UK, the index turned negative to -6.6 points (from 1). Most member states underperformed, and including Finland and Sweden while Denmark's index bounced back to -0.1 points (from -3.2).

To meet demand however, stocks of finished products nevertheless surged in the Union to 7.2 points (from 5.8 the previous month) and to a lesser degree in the Euro area to 5.9 points (from 5). France's index dropped less than one point to 10.9 thanks to the automobile industry 30 point leap while stocks of other transport equipment stayed stable.
In  Germany, the stock index climbed to 2.7 points (from -0.1), Spain's rose by two points to 13.3 while inversely Italy's index fell by half to 1.7 The UK's index increased to 21.5 (from 15.6). Out of the Union, Denmark kept momentum as its stock index rose threefold to 14.2 points.

Production trends in recent months were uneven as 13 member states, out of a total 27, recorded substantial momentum increases, with half of the Euro area's 17 countries in a similar pattern. As a result, in the Union, the index rose to -1.2 points (from -2.4) but the Euro area's dipped to 0.4 points (from 3.1). France's index surged threefold to 6.1 points and equally Germany to 4.4. Spain's index worsened to -9.1 points (from -7.8) and equally Italy's to -20.3 (from -14.8). The UK took a pause due to the previous month (22.6 points) and landed at 4.3 points. Finland remained the only Nordic country where the index rose, to 4.6 points (from 0.8) while by contrast in Sweden and in Denmark respective indices recorded significant slow down. 
 
Export order books in the Union kept deteriorating but none plunged. In the Euro area, the index fell three points to -11.6 and in the Union to -12.2 France's index mirrored the Euro area's performance and Germany as well. Spain, Italy and the UK saw their indices drop respectively to -23.9 (from -21.1) to -20.7 (from -17.2) and to -7.9 (from 0.6). Nordic states made no exception to this downward trend. With the tangible slow down in the making, employment expectations in the Union melted, to -0.8 (from an already low 2.1) and in the Euro area to 0.4 points (from 1.3). Stagnating jobless figures in the region, 10% in August according to Eurostat, reflected the impact of austerity measures on businesses and public services alike. Finland and Sweden entered negative territories for the first time since October 2010, while Poland's expectations, at an already low -6.1 points last month, demonstrated pessimism and fell to -6.9 points.

Unlike March when member states indices overwhelmingly recorded historical high due to oil products (unlikely) want over potential Suez Canal blockades, selling price expectations this month fell to sustain competition due to the general slow down context. In the Euro area, the price expectations index dropped to 6.3 points (from 7.9) prudently and by anticipation against any potential energy prices upswing, and in the Union to 7.2 points (from 8.4). France's gauge was slashed by half to 4.9 points Germany's was less drastic at 8.8 points (from 9.9) while Spain's rose to 1.5 points (from 0.2) and Italy's stabilized at 8.4 points (from 8.1). All east European member states cut their expectations drastically, on average by half, and Lithuania recorded the biggest decline to -0.3 points (from 14). 
In the UK, expectations grew another two points, forced up by higher inflation (4.5% in August) due to a weak Sterling rate, beneficial to exports but higher on import prices.