The Conference Board CEI for the Euro Area, a measure of current economic activity, continued to decline in August according to preliminary estimates. Between February and August 2009, the coincident economic index decreased by 1.1 percent (about a -2.1 percent annual rate), slower than the 2.9 percent decline (about a -5.8 percent annual rate) between August 2008 and February 2009. Additionally, the weaknesses among the coincident indicators have remained very widespread, with all four components decreasing during the past six months. At the same time, real GDP fell at a 0.5 percent annual rate in the second quarter of 2009, following a contraction of 9.5 percent annual rate in the first quarter.
After declining rapidly from the middle of 2007 through the end of last year, The Conference Board LEI for the Euro Area has rebounded strongly during the past five months. The six-month growth rate in the index has reached its highest rate since 1987 with widespread strength among its components. Meanwhile, The Conference Board CEI for the Euro Area has continued to decline; however the pace of this decline has slowed recently. Taken together, the recent behavior of the composite economic indexes suggests that the downturn in economic activity is bottoming out and that the economy is moving closer to a recovery.
LEADING INDICATORS
Six of the eight components in The Conference Board LEI for the Euro Area increased in August. The positive contributors - in order from the largest positive contributor to the smallest - are the interest rate spread, the Economic Sentiment Index, the Markit business expectations index (services), the Markit Purchasing Managers' Index (manufacturing), the Dow Jones EURO STOXX® Index and real money supply. Negative contributors - in order from largest to smallest - are residential building permits and new orders of capital goods.
With the 1.8 percent increase in August, The Conference Board LEI for the Euro Area now stands at 99.1 (2004=100). Based on revised data, this index increased 1.6 percent in July and increased 1.3 percent in June. During the six-month span through August, the index increased 8.2 percent, with seven of the eight components increasing (diffusion index, six-month span equals 87.5 percent).
COINCIDENT INDICATORS
Two of the four components that make up The Conference Board CEI for the Euro Area increased in August. The positive contributors were retail trade and industrial production. Employment declined in August, while manufacturing turnover remained unchanged.
With the 0.1 percent decrease in August, The Conference Board CEI for the Euro Area now stands at 101.4 (2004=100). Based on revised data, this index decreased 0.2 percent in July and decreased 0.2 percent in June. During the six-month period through August, the index decreased 1.1 percent, with none of the four components increasing (diffusion index, six-month span equals 0.0 percent).
