EMEA’s Business and Consumer Confidence Remains Low

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There is no question that most EMEA nations faced countless challenges last year, as regional economic recovery continued. From depreciating currencies to double-dip recessions, the road towards recovery remains a test for most, if not all, of the region’s countries.

But, are there any signs that progress will occur in early 2013? Will business and consumer confidence improve? Has any information recently been released regarding the region’s business climate?

Featuring information about bank rates, reserve funds, and business and consumer confidence, the following article provides answers to these questions – and more.

Euro Zone:
During its final meeting of 2012, the European Central Bank decided to retain its main refinancing rate at 0.75 percent for the sixth straight month. As anticipated, the Bank’s marginal lending and deposit rates were also unchanged last month, at 1.50 and zero percent, respectively. Back in July, Bank officials voted to lower all three rates by 0.25 percent, the only month in which the rates were lowered last year. Although the Bank’s present main refinancing rate is at an all-time low, some economists believe the region’s slow economic recovery, continuous debt crisis, and deteriorating monetary units may lead Bank officials to lower the rate even further in 2013, perhaps before the end of the first quarter.

In early January, the Ifo – Institute for Economic Research released its latest figures regarding Germany’s business climate. According to the data, the Ifo business climate index increased for the second consecutive month in December, rising to 102.4, the highest monthly index recorded since July. Furthermore, at 97.9, the national business expectations measurement also augmented for the second successive month. However, economists were not encouraged by some of the nation’s other business climate measurements. First, the current assessment measurement declined by one point last month, falling from 108.1 to 107.1, the first month-to-month decrease since October. And, the nation’s wholesaling and retailing sub-indices deteriorated considerably, dropping to 3.7 and -1.4, respectively. Consequently, some economists are unsure whether or not the business climate index’s recent ascension will continue this year.

As has been the case in recent months, Italy’s business confidence index remained lower than usual in December, lingering at 89 for the second straight month. In fact, since January 2012, the index has steadily been measured well below average, ranging from 87 to 91. On a positive note, one of the confidence measurement’s sub-indexes, current orders, rose last month, albeit slightly, from -43 to -42. But, the index’s two other sub-indices, current inventories and production outlook, actually declined, subsiding to -2 and -5, respectively. Likewise, the national composite business confidence measurement, which includes all sub-indexes, also decreased, falling from 76.5 in November to 75.4 in December. Unfortunately, there is presently no signification that business confidence will substantially upsurge in the near future.

After rising to RUB1.93 billion in November, Russia’s reserve fund has steadily diminished since. Back in December, the fund declined to RUB1.91 billion, a 1.4 percent decrease, when compared to November’s total. As of early January, the fund has further decelerated, falling to RUB1.89 billion, a decline of 1.1 percent, in comparison to December’s aggregate. Although this month’s deterioration was not as sharp as December’s, the fund’s total has gradually contracted in recent months; as recently as July, the fund was as high as RUB1.99 billion. In the meantime, the national welfare fund remains high, as it was measured at RUB2.69 billion in early January. Despite recent declines, some economists have projected the national reserve fund will actually accelerate in 2013 – and could potentially be as high as RUB3.17 billion before the end of the year.

United Kingdom:
Matching some economists’ expectations, the United Kingdom’s consumer confidence balance of opinion measurement decelerated last month, from -22 in November to -29. Throughout 2012, the measurement tended to linger around -29, ranging from -22 to -31. Although the measurement is presently lower than usual, it has increased in recent months; back in December 2011, the index had fallen to -33, 24 points below its long-term reading. Each of the measurement’s four sub-indices, including future personal financial situation and future general economic situation, diminished from November to December, dropping to -10 and -41, respectively. With above-average inflation and unemployment, there are currently no signs that the nation’s consumer confidence will rise in a substantial manner this quarter.

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