Despite the increase in January, The Conference Board LEI for the Euro Area remains on a general downtrend since June 2007, falling by more than 14.0 percent since then. A previous decline of this magnitude preceded the region's 1992-93 recession. Meanwhile, The Conference Board Coincident Economic Index™ (CEI) for the Euro Area, a measure of current economic activity, rose by 0.2 percent in January to 104.5 (2004 = 100), according to preliminary estimates, after falling 0.4 percent in December and 0.3 percent in November. The Conference Board CEI for the Euro Area has been trending downward since February 2008.
TCB’s LEI for the Euro Area rose in January for the first time since August 2008. Large positive contributions from the interest rate spread, the business expectations index and real money supply* more than offset a negative contribution by the Economic Sentiment Index. Between July 2008 and January 2009, TCB’s LEI for the Euro Area fell by 6.8 percent (about a -13.2 percent annual rate), below the 5.2 percent decline (about a -10.2 percent annual rate) between January 2008 and July 2008. In addition, the weaknesses among the leading indicators have remained very widespread in recent months.
TCB’s CEI for the Euro Area, a measure of current economic activity, increased in January according to preliminary estimates, after falling for the preceding four months. During the past six months, TCB’s CEI for the Euro Area declined by 0.9 percent (about a -1.9 percent annual rate), down from the 0.4 percent decline (about a -0.8 percent annual rate) during the previous six months. The weaknesses among the coincident indicators have remained widespread during this period. At the same time, real GDP declined at a 3.3 percent average annual rate during the third and fourth quarter of 2008 (including a -5.7 percent annual rate in the fourth quarter), its lowest two quarter growth rate since 1975.
Despite the increase in January, TCB’s LEI for the Euro Area remains on a general downtrend since June 2007, declining by more than 14.0 percent since then - its largest decline since the 1992-93 recession. Meanwhile, TCB’s CEI for the Euro Area has been trending downward since February 2008. Taken together, the recent behavior of the composite indexes suggests that the current contraction in economic activity is likely to remain deep in the near term.
LEADING INDICATORS
Six of the eight components in TCB’s LEI for the Euro Area increased in January. The positive contributors - in order from the largest positive contributor to the smallest - are interest rate spread, the business expectations index (services), real money supply, new orders of capital goods, the Purchasing Managers' Index (manufacturing) and residential building permits. Negative contributors - in order from largest to smallest - are the Economic Sentiment Index, and stock price index.
With the 0.5 percent increase in January, TCB’s LEI for the Euro Area now stands at 92.8 (2004=100). Based on revised data, this index declined 1.7 percent in December and declined 1.8 percent in November. During the six-month span through January, the index decreased 6.8 percent, with two of the eight components increasing (diffusion index, six-month span equals 25.0 percent).
COINCIDENT INDICATORS
Three of the four components that make up TCB’s CEI for the Euro Area increased in January. The positive contributors were manufacturing turnover, industrial production and retail trade. Employment remained unchanged in January.
With the 0.2 percent increase in January, TCB’s CEI for the Euro Area now stands at 104.5 (2004=100). Based on revised data, this index decreased 0.4 percent in December and decreased 0.3 percent in November. During the six-month period through January, the index decreased 0.9 percent, with none of the four components increasing (diffusion index, six-month span equals 12.5 percent).
