Regional consumer confidence remains low

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With mounting unemployment and depreciating monetary units, global economists were not entirely surprised by September’s economic figures, which revealed that EMEA’s business and consumer confidence remained low. But, did October’s data provide any evidence that relief is in sight?

As an indication of the region’s present economic situation, the following statistics concerning inflation, business and consumer confidence, business climate, and reserve funds were recently released to the public.

Euro Zone:
In early October, the Euro Zone’s latest preliminary Consumer Price Index (CPI) figures were published, revealing that consumer prices remained stable last month. From January to September, the Euro Zone’s annual CPI rose by 2.4 to 2.7 percent – and October’s figures were similar, as consumer prices increased by 2.5 percent from October 2011 to October 2012. As the region’s recession continues, inflation is expected to remain low in late 2012 and early 2013. Currently, the European Central Bank believes the Euro Zone’s annual headline inflation will increase by 2.5 percent this year and 1.9 percent in 2013.

After rising slightly from July to September, the nation’s business confidence composite indicator declined in October, falling to a 38-month low of 85. As the indicator has remained below its long-term average of 100 throughout 2012, some economists projected the measurement would weaken in October, but no one anticipated such a sharp decline. In fact, five of the measurement’s six sub-indices decreased last month; the finished goods inventory level sub-index was the only indicator that rose in October, climbing from 7 to 15. Most global economists currently believe France’s business confidence composite indicator will linger below 100 throughout the coming months due to Europe’s ongoing recession, weakened monetary units, and above average unemployment.

Prior to the release of Germany’s most recent business climate index, many global economists projected the measurement would decline for the sixth consecutive month in October. But, few anticipated the index would decelerate as sharply as it did, falling from 101.4, previously a yearly low, to 100 – the lowest measurement recorded since January 2010. In spite of the promise of an upcoming bailout fund, the measurement’s current situation and trade and industry sub-indices each declined from September to October, while the business expectations measurement sub-index lingered at 93.2 for the second straight month. With the announcement of the European Central Bank’s open-ended purchases of sovereign debt, some economists are still optimistic, believing the nation’s business climate index will improve prior to the end of 2012.

Since declining marginally in August, Italy’s consumer confidence measurement has steadily risen throughout the last two months, climbing to 86.4, its highest index since July. The increase had been projected by a majority of economists, despite the fact that September’s index of 86.2 was only 0.8 points below an all-time low. In fact, three of the index’s sub-indices, personal, current, and future, weakened in October, dropping to 91, 91.9, and 76, respectively, while the fourth sub-index, economic, rose slightly, from 71.1 to 71.7. Although a rise in consumer confidence is typically a sign of economic recovery, many economists do not presently foresee a significant upsurge in confidence levels. As a result of mounting unemployment and consumer prices, consumer confidence will likely remain low during the first quarter of 2013.

In early October, Russia’s reserve fund diminished for the first month since August, declining from RUB1.95 trillion to RUB1.90 trillion. The decrease surprised many global economists, as the fund had not been that low since May, leading some financial experts to believe the fund would continue to contract in November. But, according to recently released statistics, the fund actually augmented this month, rising to RUB1.93 trillion. Although the fund is still lower than it was this summer, as it was as high as RUB1.99 trillion in July, it has increased by 144.8 percent since November 2011, mainly due to an injection of RUB1.09 trillion worth of oil and gas revenues in January. The injection occurred after the government ran a fiscal surplus throughout 2011; such injections are not projected to transpire in the near future. Economists currently believe the fund will remain near RUB1.93 trillion until 2013.

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