Despite the fact that some would have it that I am given to presenting critical data, whilst ignoring the more positive variants, the real reason I didn't get round to posting on the most recent confidence indexes is that I have been labouring under the effects of a heavy cold. Sometimes the simplest explanation for events is the most accurate one, and we are, as Nietzsche was want to say, 'human, all too human'.
As far as business confidence indexes goes last week largely brought good news, with the readings rising in France and Germany, as well as in Italy.
Business confidence in Germany and France unexpectedly rose in October as lower oil prices and exports to Asia brightened the outlook for economic growth in Europe. Stocks rose to the highest in five years and bonds fell.
The Ifo institute in Munich said today its index climbed to 105.3 from 104.9 in September. Economists expected a decline to 104.5, the median of 39 forecasts in a Bloomberg News survey showed. In France, a gauge of optimism advanced to 108 from 106 in September. Germany and France together account for more than half the euro region's economy.
Italian business confidence remained near a four-month high in October as declining oil prices reduced manufacturing costs and orders increased. The Isae Institute's confidence index fell to 97.1 from 97.3 in September, the state-funded research center said today in Rome.
As we have been seeing, China forms a big part of the story here:
Foreign demand and cheaper oil prices are easing those worries for now. European exports to China jumped 21 percent in the first seven months of this year compared with the same period a year ago, the European Union's statistics office said last week. Confidence among exporters in Germany and France rose in October, today's reports showed.
``Trade between Asia and Europe has grown stronger this year, and that trend will continue,'' said Klaus Herms, chief executive officer of Germany's Kuehne & Nagel International AG, which books space on ships and planes for exporters.
The real question is where we go from here. There is some discussion in the press about the relative weighting of the "current conditions" and the "expectations" components in these indexes, with the suggestion being that the high values being registered are more a reflection of the former. The FT had a good summary last weekof the relative readings on (and variance between) the German Ifo and ZEW surveys.
My feeling is that the outlook moving forward is much more complicated than this months readings suggest. Of course others may chose to differ, and we will soon see who is right.
Italy's business confidence ``probably has pretty much peaked,'' said Perkins at ABN Amro, who says investors have expected French, German and Italian businesses optimism indexes to drop for the past six or seven months.
An index measuring production expectations for the next three months fell to 21, from 22 in September, Isae said. A measure of price expectations for the next quarter rose to 19, the highest in at least three years, from 17 in September.
Confidence in Italy in the coming months may be hurt by the government's efforts to tame the budget deficit next year, which includes 34 billion euros of spending cuts and revenue measures, including tax increases.
Prime Minister Romani Prodi's budget proposal, which needs to pass in parliament by the end of the year, was not enough to stave off downgrades by both Standard & Poor's and Fitch Rating last week. Both S&P and Fitch said the budget didn't do enough to cut spending and relied too much on higher tax revenue to lower the deficit and debt.
Italian consumer confidence fell in October from a four- year high, partly on concern that higher taxes included in the government's budget plan would leave households with less money to spend.
Update
Thanks to Paris for providing a link to the latest industrial data from ISTAT, which is up in October 3.4% y-o-y (I'll put an English language link as and when I find one). This is completely consistent with the current conditions component of the above-mentioned indexes. So there is no doubting the currently favourable environment, the question is where exactly we are in the cycle. My feeling is that we are now at, or near, the top of this cycle. In any event we are soon about to find out.
Italy Economy Real Time Data Charts
Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Italy related comment. He also maintains a collection of constantly updated Italy economy charts together with short text updates on a Storify dedicated page Italy - Lost in Stagnation?
4 comments:
Well I'm sure you'll be glad to report that Italian Industrial Production rose 3.4% in October.
Here's the link:
Link
Morning Paris. Glad to see you are out there and keeping an eye on me. Did you ever see the film "Someone to Watch Over Me". I have updated with your link. Thanks. Now we will soon get to see what happens next. My feeling is that by the turn of the year things will be much clearer. I could, of course, be wrong :).
The end of the year is two months away? I doubt we will know all that much more than we do now. What is clear from the data, rather than the opinions of various analysts, is that economic growth in Europe and Italy is continuing.
The real risk out there is what is going on in the U.S.A., which could also have a serious knock-on impact in Asia.
"I doubt we will know all that much more than we do now."
Well that depends. What I am saying is that we will be in a much better position to judge whether or not this is the top of the cycle in Europe, and consequently whether ECB rates are likely to continue upwards or start to come down in 2007. This seems to be one of the most immediate things which stands between us. My guess is that the December data will be very interesting, one way or another.
But this isn't apocalypsis, just a milestone along the road which should help us all see a bit more clearly what is happening.
At the same time we should then know the content of next years budget, so we should be a bit clearer of how much fiscal tightening there is going to be, and again this will make it easier to take a guess about the growth rate for Italy 2007.
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