March 20, 2017

Chart of the week – Fathom’s FRESI suggests strong Q1 momentum, despite political risk

by Fathom Consulting

While long-term prospects in the euro area remain bleak, short-term cyclical indicators have turned more positive. France is a case in point. Our French Economic Sentiment Indicator (FRESI), part of a suite of proprietary indicators created by Fathom, distils the message from the responses to 18 different surveys into one composite measure.

chart_of_the_week_march_20

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Several months of increases in two of the FRESI’s key drivers – the composite PMI and a measure of household confidence provided by the French statistics office INSEE – drove it to 0.7% in February 2017 from 0.6% in the previous month. It is now close to pre-crisis highs.

The indicator has been trained on quarterly French GDP growth, and by construction it has the same mean and variance as that series. Our FRESI displays less short-term volatility than quarterly GDP growth. It aims to measure underlying economic activity in the French economy, rather than act as the best possible predictor of GDP growth from one quarter to the next.

Our FRESI points to strong underlying momentum going into the first quarter of this year, suggesting that the cyclical upturn in France, and across the euro area more broadly, has some way to run.

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