Italy Economy Real Time Data Charts
Friday, December 28, 2007
>A 58 percent jump in oil prices this year is raising energy costs and leaving households with less money to spend on consumer goods. Italy's inflation rate jumped to a two-year high in November and consumer confidence fell to a four-month low in December on signs of an economic slowdown.
The Organization for Economic Cooperation and Development and Confindustria, Italy's biggest employers' lobby, cut their forecasts for 2008 growth in Italy in December. The OECD lowered its estimate to 1.3 percent and Confindustria said growth in Europe's fourth-biggest economy would slow to 1 percent from 1.8 percent this year, citing the rising cost of food and oil.
A three-day lorry drivers strike earlier in December caused temporary shortages of food, gasoline and medicine throughout the country, and some retailers polled by NTC reported a "negative impact" on sales.
The pace of Italian household spending, which constitutes two-thirds of the Italian economy, slowed across 2007, growing by just 0.2 percent in the third quarter compared with 0.6 percent in the second quarter, national statistics office Istat said Dec. 7.
About 35 percent of retailers surveyed said they missed their sales targets this month, with only 7 percent reporting they beat their expectations. ``The disappointing performance during the key Christmas trading period was largely due to surprising weakness in consumers' disposable income,'' NTC said.
Italy's debt-payment costs jumped in 2007 as rising interest rates forced the government to offer investors more to buy its bonds. The average yield on the government's more than 1.6 trillion euros ($2.4 trillion) of debt, the largest in the European Union, rose to 4.14 percent this year, from 3.34 percent in 2006, the Treasury said in a report from Rome today.
Tuesday, December 25, 2007
Credit crunch, did someone use the expression credit crunch?
Friday, December 21, 2007
A sub-index measuring manufacturers' expectations for production in the next three months fell to 11, the lowest since July 2005.
``The short-term production outlook probably is being hurt by the declining forecasts regarding the international growth cycle,'' Isae said.
The Organization for Economic Cooperation and Development predicted on Dec. 6 that eurozone growth will slow to 1.9 percent next year from 2.6 percent in 2007. The OECD has also cut its forecast for 2008 U.S. growth to 2 percent from 2.5 percent. Non of these predictions may turn out to be accurate, but they are all pointing in the same direction.
Growth in Italy, which is Europe's fourth-biggest economy, has lagged behind the Eurozone average for the last 11 years, and will continue to do so for at least the next two, according to the European Commission in a Nov. 9 forecast.
Confindustria, Italy's largest employers' lobby, on Dec. 14 also cut its forecast for the Italy's economic growth next year to 1 percent, almost half the rate predicted for 2007.
Thursday, December 20, 2007
A 48 percent jump in oil prices this year is raising household energy costs while a lorry driver's strike has disrupted this months delivery of basic foods such as milk, boosting grocery bills. Higher credit costs sparked by rising mortgage defaults in the U.S. are also starting to weigh on consumer optimism in what is still Europe's fourth-largest economy.
The biggest concern expressed by consumers concerned the outlook for the economy. Optimism about the general economic situation fell to 89.6 from 91 with confidence about future prospects dropping to 112.5 from 113.7, Isae said.
Consumer spending has been consistently weak in Italy in recent years. Retail sales declined for a ninth month in November, accordig to the Bloomberg sponsored purchasing managers index showed.
The pace of household spending slowed to 0.2 percent in the third quarter, compared with growth of 0.6 percent in the previous quarter, according to the ISTAT National Accounts data.
Italian economic growth has lagged behind that of most other counties in the eurozone for more than a decade now (the other weak party is Germany in this regard). The Italian government cut its growth forecast (29 Sept) for next year to 1.5 percent from an earlier 1.9 percent forecast. The Italian government is still more optimistic than the European Commission, however, since the latter estimate Italy's 2008 growth rate at 1.4 percent, and there are plenty of downside risks all round here.
Monday, December 10, 2007
The economic outlook for what is Europe's fourth-biggest economy is dimming by the day, as imports continued to outpace exports in the third quarter and as the pace of consumer spending growth slackened in Q3 2007.
Italian production of consumer goods dropped 0.1 percent in October, according to the detailed breakdown of today's data. Manufacturing of non-durable goods such as clothing fell 0.1 percent. Durable goods, which include washing machines and refrigerators, declined 0.2 percent.
Friday, December 07, 2007
As we can see, quarter on quarter growth was up slightly from Q2, although the underlying trend is obviously down.
So the question is, what is dragging things down and what is pulling things up? Well one of the big downside issues is definitely the surge in imports.
And in Italy's case I think we know the culprit: the high value of the euro. Faced with this surge in the relative value of the euro Italian exporters simply can't hack it, even in the eurozone, or among the EU10 effective peggers. The strength of ex-zone competition in some of Italy's key export areas is just too strong. In fact exports did not have a bad quarter, since they rose 0,9% q-o-q, but this was completely dwarfed by the 2.4% q-o-q surge in imports.
Household spending, which makes up two-thirds of Italy's economy, grew slightly (by 0.2 percent) but was down when compared with the 0.5 percent rise achieved in the second quarter, or the 0.7% one in the first quarter.
Be all this as it may, Italian domestic consumption, despite the increase in the working population via immigration and the low levels of unemployment registered recently, remains very weak.
As can be seen, Italian household consumption has been congenitally weak over a number of years now, and the only real bright spot has been at the end of 2006 and the begining of 2007. This took me by surprise I must admit, and mirrors what we have also seen in Germany and Japan, and it was undoubtedly this phenomenon that lead to all the speculation about uncoupling, but now, as we are seeing, things are returning pretty much to where we left off a couple of years back, which I think is important.
Due to the similarity in the structural components here between Germany, Japan and Italy (with Italy's weaker export performance being the only real distinguishing feature) Claus Vistesen and I are arguing that all of this is age related, and so just to close on a novel note, here are the comparative median ages for Germany, Italy and Japan, for 1990 to 2020 (click on image for slightly better viewing). This is definitely one area where all 3 are world leaders.
Thursday, December 06, 2007
Any reading below 50 on this index indicates contraction, thus retail sales have only managed an increase - as measured by this index - in four months this year. Retail sales across the entire 13-nation euro region also fell in November according to eurostat data released yesterday, dropping by 0.7 per cent from October to a level which is just 0.2 per cent above the November 2006 level. Of course this average hides considerable variance, with the weakest performance coming from Germany, Italy and Belgium.
Also worthy of note is the performance of retail sales in Spain (the zones 4th largest economy) since strong growth in Spain has previously offset weaknesses in Germany and Italy at critical junctures. But this time it will be different, since Spanish retail sales have fallen in both October and November, and while the year on year readings are still in positive territory, they will not remain there for long since the earlier strong readings will eventually drop out of the data.
And since the spring the story in both services and manufacturing has been one of one long and sustained declined, as the data from the monthly Bloomberg/NTC Purchasing Manager Indexes reveal.
Meanwhile the consumer confidence index prepared by the Instituto de Credito Oficial continues to plummet the depths, registering at 76.1 in November a historic low for the third consecutive month.
This drop in confidence is also reflected in the data for new mortgages issued (latest data still only September unfortunately), where the slowdown is clear if you compare the numbers for 2007 with those for 2006 (and especially since the spring, although my feeling is that when we get numbers for October and November we will see the slowdown accelerating, as buildings contracted in 2006 reach competion. Of course we should remember that those buildings and flats sold on the basis of architects plans in June and July - ie prior to the August sub-prime "bust" - will still be giving work until next summer, even if the would be purchasers may be increasingly looking for an "escape clause" as property prices steadily decline).
If we turn to the employment sub-component of the Spanish index we will see that the outlook has changed dramatically in the last three months.
and the underlying situation again becomes clear if we look at the unemployment numbers, where a comparison between 2006 and 2007 is again revealing. We can see that in the early months of this year the employment situation was up over 2006. Then the situation turned (around July), and since then it is "down hill all the way" unfortunately.
Italy is Creaking At the Door
Italy of course isn't in much better state, and Italian retail sales declined for the ninth month this year in November as the bleaker economic outlook continued to damp consumer demand, according to the Bloomberg retail purchasing managers index monthly survey. The reading has been below 50, the level that signals a contraction in sales, every month except January and February. And at 50.6 (January) and 50.4 (February) sales were barely increasing (on a seasonally adjusted basis) even then.
Of course Italy has long been regarded as the "sick man of Europe" so this result is not too surprising. Business confidence is non-too strong either, and the ISAE Italian business confidence index declined in November to the lowest level in almost two years as the euro's gains have continued to acting as a curb on exports. The Isae Institute's business confidence index fell to 92.2 from a revised 92.8 in October, the lowest reading since December 2005.
In addition the Italian services sector purchasing managers index fell to a seasonally adjusted 50.8 in November from 55.3 in October. So Italian services are still ekeing out a small expansion, but they are creaking.
While the Italian manufacturing sector purchasing managers' index remained at a seasonally adjusted 51.3 in November the same level as registered in October. So in both cases, the expansion continues, but only just, which is the same thing as saying that- since the negative exports balance is now a net drain on GDP growth, and government spending should be under a tight rein to bring down the debt - the the Italian economy may now be near to a contraction phase.
Returning now to take another look at Germany, what is most curious is how German consumers are reining-in spending and becoming ever more pessimistic even as the jobs market remains reasonably buoyant. Earlier last the week we learnt that German consumer confidence, as measured by the GfK AG's index had fallen to the lowest in almost two years.
Business confidence is not much better, with the IFO index - which managed a very modest recovery this month from last month's low - in very negative sentiment mood (and the ZEW index isn't any better).
Meantime German unemployment declined for a 22nd straight month in November, falling to the lowest level in more than 14 years (using ILO methodology), as companies took on more workers to meet increased demand. The adjusted number of people out of work fell by 53,000, according to the Federal Labor Agency in Nuremberg. The jobless rate, adjusted for seasonal swings, slid to 8.6 percent in November, the lowest since April 1993, from 8.7 percent in October.
In fact the total, unadjusted number of unemployed is the lowest for the month of November since 1992, when it was 2.97 million, according to Labor Minister Olaf Scholz. In addition the number of those employed continues to rise.
Also the number of those paying social security contributions continues its rise:
which is again worthy of note, since for some years the absolute number was falling:
So looking at these numbers, you might wonder what all the pessimism is about. Well the problem basically revolves around why increases in German wages and salaries have, despite this exceedingly positive general situation, remained generally weak.
What is notable about the above chart is the way in which the tightening labour market has not produced any substantial upward pressure on wages. Of course, one version of the story would tell us that this is because the German workers have been behaving like very good boys and girls. But is the more too all of this we might like to ask ourselves, especially since all of this is more or less a repeat performance of what has been happening in Japan.
And of course the weak earnings situation is passed on to consumption, with the consequences we can see in the chart below, which if for the quarterly development of private consumption in Germany since the start of 2005. No economic locomotive to be seen there, I fear. And before you leave the chart do note just one more time that spike in consumption in the last quarter of 2007. That's the VAT effect, you know, the one everyone tried to tell us didn't exist. Well it did, and just look what happened next to German consumption after the 3% hike. Relative prices, like relative exchange rates, do of course matter, and anyone who tries to tell you otherwise missed something in their basic economics course, I think.
Unfortunately one detail we don't have relates to the role of part-time employment in these numbers. I have been looking in detail at the Japan data, and there we do have this breakdown, and it is clear that the growing disconnect whereby we have significant GDP and employment growth by comparatively weak earnings and consumption performance may have something to do with this, and with the skill composition of the work being undertaken. Of course here I would see an age related dimension, but I guess for some that would be quite a tendentious point. Nonetheless we do have data from the recent past about the share of part time employment in total employment in Germany, and as we can see it has been steadily rising.
Be all this as it may, it seems that the path of Jean Claude Trichet will not be blocked, and that our stalwart central bank president - like the ubiquitous Ms Thatcher before him - is not for turning. This gentleman is not going to let himself be brow-beaten by mere fact.
Trichet in fact once more emerged from his un-announced early within-cloister retirement from the high-media-profile stage yesterday to give a talk in Berlin (in preparation, one imagines, for his ECB performance today) where he singled out Finnish nurses and German postal workers for particular criticism, holding they not taking sufficient account of their social responsibilities. What he means is, of course, that inflation is putting the ECB in a very clear double bind when it comes to taking a decision on interest rates.
But wages, as we have seen are not the pricipal issue here, at least in the German case (and the Finnish one is not that much different). The real culprits in the eurozone inflation surge - the last flash estimate from Eurostat put the eurozone average HICP rate at around 3% for November - are energy and food prices, and this inflation has more to do with global structural factors than it ever does with minimum wages in the eurozone (ie it is a result of the fact that the BRIC economies etc are driving the growth, and their rates of energy consumption are rising rapidly, while their population spends a higher part of their rapidly rising income levels on food products - maybe 25% of the extra income - than is the case in the developed economies).
Other explanations for the pessimism to be found in Germany (ie beyond the employment and wages data), of course, abound. Two prime candidates, oil and food price induced inflation and the rising euro tend to head the list. The euro, which rose to a record $1.4967 on Nov. 23 before dropping back slightly, has gained more than 12 percent against the US dollar so far this year and is trading at around $1.4673 as I write. Crude oil rose to a record $99.29 on Nov. 21 and was trading at $89.42 in electronic tradiong on the New York Mercantile Exchange earlier today.
The rising euro may well have an impact on Germany's export performance, while oil prices influence inflation, and through this consumer purchasing power. In fact inflation jumped in Germany in November to 3.3 percent according to the EU harmonised index, and this is the highest level registered in Germany since records began in 1996.
To Cut or Not to Cut?
The European Central Bank, which has raised the benchmark interest rate eight times since the end of 2005 as part of a "normalisation" and anti-inflation process, meets today to decide on interest rate policy . So far the bank has been buying time by arguing we still cannot adequately judge the impact of the financial turbulence spin-off from the U.S. housing slump and in exercising this caution they are almost certainly right. As Claus indicates in this post, there are indeed tough times ahead at the ECB.
And indeed there are. Only yesterday the Italian Vice Minister for the Economy Vincenzo Visco was informing a parliamentary panel that "The economic situation and world markets are very uncertain and present risks. It is expected that the Federal Reserve will cut interest rates and it would be suicide if the ECB didn't do the same thing for the euro zone." And it is not only the politicians this time round, ECB council members Christian Noyer and Jose Manuel Gonzalez-Paramo have been indicating that they are prepared to start talking interest rate reductions in a not very distant future. Noyer is saying that there has to be a "question mark" over whether or not Europe can dodge the fallout from the U.S. sub-prime generated turmoil (and see this post for an examination of the extent of the credit shock in the European banking system), while Gonzelez-Paramo rejected the idea that cutting rates would amount to a bailout of investors who lost money on bad bets. Central banks are not encouraging risk taking if they lower borrowing costs "when financial turbulences develop into a fully fledged crisis and eventually affect growth prospects" he stated at a conference in Milan earlier this week. So while we may well see a stand firm "on hold" posture on rates today, a change in the air cannot be far away now.
Even on the euro front "the times they are a changin", and rapidly rapidly, with even German Finance Minister Peer Steinbrueck - who as recently as Nov. 27 was expressing his confidence that Germany had "become much more resilient to negative economic impetus" and was going through a "robust recovery" is now suggesting that what we have is "a disorderly adjustment and unwinding."
In fact German leaders generally are now expressing a mounting unease over the euro's rise against the dollar and other currencies , and especially as survival warnings from European planemaker Airbus ring through their ears.
And remember, the weaker dollar can help American exporters at a time when the U.S. economy is suffering from a housing slump, trouble in mortgage markets and a going-global credit crunch "Exports are a huge bright spot in the economy ... and a source of strength going forward," Janet Yellen, president of the Federal Reserve Bank of San Francisco, is quoted as having said on Monday. As I argue in this post, the longer term problems in the US economy aren't anything like what they are currently being made out to be.
Of course the euro is now more than 20 percent over its dollar value two years ago and has been hitting record peaks recently against the yen, while China's currency has lost ground to the euro even while it has gained it against the dollar. Yet despite this, the trade-weighted rise in the euro this year has been limited to just 4 percent.
But this is just the point, what we need to ask ourselves is where the exports are currently headed, and what the prospects are in those countries. It is very important to take note of the fact that Germany's strong export performance has been to countries like the UK, and Spain, who may now struggle in the wake of the sub-prime crisis, and to large chunks of Eastern Europe, where some key economies may now be on the point of undergoing a major correction. The fact of the matter is that German exports to the Czech Republic were roughly equal in value last year to German exports to China (and both of them were less than, say, German exports to Poland). That is a good measure of the importance of the Czech Republic for the German economy, but it is also a measure of just how poorly positioned Germany actually is in China, and generally throughout emerging Asia as we move forward. At the end of the day exchange rates do matter, and perhaps the recent visit of EU dignitaries to China (and what they have realised during their visist) has as much to do with Mr Steinbrueck's change of heart as anything.
Postcript: the astute reader will note that out of the eurozone big four - Germany, Italy, Spain and France - there is no real mention of the Frech economy in this post. This is largely becuase, important as it is to the eurozone, Claus and I by and large take the view that the French economy is "Monsieur Average" in eurozone terms. By this we mean that the French economy - despite an ever present need for adaptation and reform - is very far from being the European sick-man some ideologues would make it out to be, just as the US economy - and see this excellent piece from MacroMan - is far from being the global economy sick man another group of ideologues would have us believe (isn't it curious how most of the ideologues like to line themselves up around an axis which goes from France to the United States?). So growth in France will be what? Well guess - average, neither powering the euro economy forward, like Spain has done in the strongest moments of its housing boom, nor acting as a sheet-anchor drag like Italy tends to do in the worst of her downswings. Indeed, given this Monsieur Average quality a good argument could be made that France is the one eurozone economy that has been exposed to more or less appropriate monetary policy and interest rates since the inauguration of the euro. And guess what, interest rates, just like exchange rates, do matter.
Meanwhile the Italian manufacturing sector purchasing managers' index remained at a seasonally adjusted 51.3 in November the same level as registered in October. So in both cases, the expansion continues, but only just, which is the same thing as saying that- since the negative exports balance is now a net drain on GDP growth, and government spending should be under a tight rein to bring down the debt - the the Italian economy may now be near to a contraction phase.
Thursday, November 29, 2007
In fact the index of retail sales dropped to 45.3 in November, down from 48 in October, according to the survey of 440 executives compiled for Bloomberg LP by NTC Economics Ltd.
``The global outlook is darkening by the day, and Italy's low potential growth rate makes it particularly vulnerable......Risks to growth are skewed to the downside and even the chance of a recession cannot be dismissed lightly.''
Vladimir Pillonca, Morgan Stanley' Global Economic Forum Italy specialist.
Record oil prices have pushed up fuel costs, crimping household spending. Retail sales will tumble this quarter amid ``worsening economic conditions,'' the NTC report said. Crude oil prices rose to a record $99.29 a barrel on Nov. 21.
About 46 percent of retailers surveyed said they missed their sales targets last month, with 13 percent reporting they beat their expectations. A gauge of sales expectations dropped to 33.6, the lowest reading since 2005.
Twenty-seven percent of the retailers said that their margins deteriorated from the previous month, partly because of ``promotional discounts designed to stimulate demand,''. A gauge of gross margins fell to 39.0, the report said, indicating the sharpest rate of contraction this year.
(For the Bloomberg retail indicator, NTC recruits) a representative panel of retail companies in Germany, France and Italy, which together make up 80 percent of total euro-region retail sales by value. The panel includes large, chain retailers as well as smaller stores).
Tuesday, November 27, 2007
Again, I would draw attention to Claus Vistesen's eurozone Q3 GDP conclusions:
Although the slowdown seems set to be Eurozone and indeed also EU25 wide I will be watching Italy, Greece, and Portugal in particular since these three countries are those most likely to feel the pinch longest and hardest.
Wednesday, November 21, 2007
Gross domestic product rose 0.4 percent from the second quarter, when it grew 0.1 percent, and expanded 1.9 percent when compared with Q3 2006.
Where we go from here is really anyone's guess, but there must be strong downside risks. Claus Vistesen has quite a comprehensive summary of the Q3 eurozone situation here, and Morgan Stanley's Vladimir Pillonca is hardly optimistic:
The Italian – and global – growth outlook seems to be darkening every day, despite the expected bounce-back of growth in the third quarter. We forecast Italian growth to slow sharply next year, to just 1.2%Y, from 1.8%Y this year, and we don’t anticipate a recovery to gather traction until the second half of next year. Risks are skewed to the downside. The possibility of a growth recession next year – defined as two or more quarters of negative quarter-on-quarter growth – is not a remote one.
as he says:
Consumer spending looks set for a slowdown after an unsustainably strong first half of the year. After all, wages are barely rising once we account for inflation, and both tax pressure and interest rates have risen in the recent past. Forward-looking consumers are likely to react to a more uncertain future, by allowing their savings to rise and their consumption growth to fall.
Is he clairvoyant or something, since this is exactly what the ISAE survey is showing consumer expectations to be at this point (and Pillonca's piece was written before this data release).
I will try and find the time to do a more in-depth analysis of Italian GDP when the full results are published in early December.
One surprising detail in this months report is that consumers are saying that they are more likely to save their money than spend it in the near future, possibly becuase they are anticipating an economic slowdown in Italy.
A sub-index measuring household confidence in the ability to save rose to 143 from 132, and another measuring the ability to put money away in the future rose to minus 76 from minus 86. On the other hand, consumers grew more negative about growth, with a gauge falling to minus 35 from minus 29.
Sunday, November 11, 2007
Production fell 1 percent from the previous month, when it rose a revised 1 percent, according to data from the national statistics institute - Istat, released at the end of last week.
According to Luca Cordero di Montezemolo, chairman of Fiat SpA, Ferrari SpA and head of Italy's Confindustria ``The strong euro is creating enormous problems....When a company like Ferrari exports 30 to 35 percent of production to the dollar area, it's hard for us.''
Concern about the strength of the rising value of the euro, which climbed to a record of $1.4738 on Friday, has also help drag Italian business confidence to its lowest level in almost two years in October. In addition oil prices moving in the direction of the $100 a barrel range are raising manufacturing costs and leaving households with less money to spend.
The European Central Bank left the benchmark interest rate unchanged last week as policy makers weighed signs of slowing economic growth in countries like Germany and Italy against the threat of accelerating inflation.
Manufacturing in France and Germany, Italy's two biggest trading partners,is also slowing. French production dropped 1.1 percent on August while German output growth slowed to 0.3 percent from August when it surged 1.9 percent.
Italian production of consumer goods declined 4.2 percent in the month. Manufacturing of non-durable goods such as clothing declined 4 percent. Durable goods, which include washing machines and refrigerators, fell 3.7 percent.
The declines in production of consumer-related goods reflect Italian households' reluctance to spend, and indeed Italian retail sales fell for an eighth month in October.
The Italian government last month cut its economic growth forecasts to an expansion of 1.9 percent this year, slowing to 1.5 percent in 2008, as rising credit costs triggered by the collapse of the U.S. subprime mortgage market damp the global expansion.
Thursday, November 01, 2007
Wednesday, October 24, 2007
The Isae Institute's business confidence index rose to 92.9 from a revised 92.4 in September, the Rome-based research center reported today. Manufacturers were more optimistic about their current prospects for production, with the relevant measure rising to minus three from minus seven, Isae said. Still, the report reveals considerable pessimism about prospects for the future. A measure of expectations for future orders fell to minus seven from minus six in September, and of particular note a measure of foreign orders fell to minus 10 from minus seven.
Tuesday, October 23, 2007
According to the report:
The euro area1 (EA13) industrial new orders index2 rose by 0.3% in August 2007 compared with July 2007. The index fell by 2.6% in July3. EU271 new orders increased by 1.0% in August 2007, after a decrease of 3.5% in July. In August 2007 compared with August 2006, industrial new orders increased by 5.1% in the euro area and by 8.2% in the EU27.
In August 2007, among the Member States for which data are available, total manufacturing working on orders rose in seventeen and fell in three. The highest increases were registered in Poland (+81.6%), Hungary (+33.3%) and Lithuania (+28.2%), and the only decreases in Denmark (-18.4%), Italy (-1.8%) and the Netherlands (-0.4%).
What stands out here is the clear difference between Western and Eastern Europe. Eastern Europe is still accelerating - overheating considerably some would say - while Western Europe is slowing visibly.
Among the eurozone countries which are most notably slowing at the moment I would single out Italy, Germany, Greece and Spain for rather close attention. Germany and Italy have long had their growth ups and downs, which have in the last decade been more downs than ups, but Greece and Spain (two of the three construction boom countries, the other being Ireland) have normally maintained a fairly strong profile through the downturns, and this has tended to take some of the edge of the recent weak periods. This time it may well be different, since the construction driven economies may well be even more affected than the "usual suspects", something which makes this downturn an even more problematic one.
Now if we look at the evolution in orders in recent months, we can see that everyone has been slowing to some extent (less growth, rather than outright contractions) and the German case particularly stands out for the much lower rate of expansion in new orders following the very good period earlier in the year.
If we look at the month on month changes, I would single out just how evidently Spain has been slowing, and the strong underlying weakness which is being revealed in Greece. Italy as we can see has shown virtually no increase in the level of new orders since the early summer.
The general German picture is only confirmed if we look at the data released today from the Federal Statistics Office which shows that building activity in Germany decreased 4.4% in real terms in August 2007 when compared with August 2006.
As reported by the Federal Statistical Office, the total price-adjusted value of orders received by building construction and civil and underground engineering enterprises in Germany decreased 4.4% in real terms in August 2007 from the same month of the previous year. In building construction demand slumped 7.6%, in civil and underground engineering it fell 1.3%. The number of employees amounted to 713,000 at the end of August 2007. That was a decrease of 28,000 (–3.8%) compared with August 2006.
This situation is clear enough if we look at the chart for German construction activity since the end of last year, using the Eurostat monthly data which only runs to July (ie to before the "financial turmoil" of August). The slowdown from the previous boom is clear enough. Now it only remains to be seen how far it goes. This situation in Germany is, at the end of the day, quite important for Italy, since Germany is an important customer for Italian exports.
Italian consumer confidence in October was unchanged from September as higher energy prices and signs of slowing economic growth weighed on optimism. The Rome-based Isae Institute's index, based on a poll of 2,000 households, held at 107.3, the same as last month.
It's hard to know what to make of this reading at this point. As I have often said I don't think we can eak too much pleasure or pain out of any one single data reading. The index level is, of course, still well down on the highs registered earlier in the year, and most of the real economic indicators are on their way down, with the exception of unemployment, of course, but I have already addressed this apparent anomaly here.