December 18, 2017

Chart of the Week: Fathom’s ESIs Shrug off Euro Area Political Uncertainty

by Fathom Consulting.

by Fathom Consulting.

Fathom’s latest Economic Sentiment Indicator (ESI) for the euro area remained unchanged at 1.4% in November, with the country-level indices confirming that the upswing in economic sentiment remains elevated across the currency bloc.

Refresh the chart in your browser | Edit chart in Datastream

France’s ESI saw the largest monthly increase, rising from 0.8% to 0.9%, predominantly driven by strength in both the manufacturing and services PMIs. The headline consumer confidence survey also jumped by two index points to 102.4 in November, indicating that rising optimism about the French economy is broad-based. Surprisingly, ongoing political uncertainty in both Germany and Spain is yet to have a meaningful impact on either country’s ESI, with both remaining elevated. Italy’s ESI continues to outperform hard economic data and is hovering around all-time highs, but elections must be held before the end of May next year and they have the potential to spark fresh waves of volatility, with a reversal in economic sentiment a strong possibility. That being said, the fragility of Italy’s recent upswing in economic sentiment has financial-market implications. We maintain our call that Italy’s weak fundamentals will continue to constrain its long-term growth potential and so stand by our recommendation to hold French and German equities relative to Italian equities.

______________________________________________________________________

Thomson Reuters Datastream

Financial time series database which allows you to identify and examine trends, generate and test ideas and develop view points on the market.

Thomson Reuters offers the world’s most comprehensive historical database for numerical macroeconomic and cross-asset financial data which started in the 1950s and has grown into an indispensable resource for financial professionals. Find out more.

Get In Touch

Subscribe