Overview Of Important Eurozone Economic Releases

OK, so I’ve shown you the ‘ocean liner’ economic numbers for the Eurozone and explained why they’re often too slow and cumbersome to affect on the market. Now we can look at the zippy jet-skis, the snappy, forward looking indicators.

As you’d expect, Europe is choc-a-bloc with different sentiment and lead indicators; it’s another form of Euro-gravy train to get paid for asking 250 Chianti drinkers if they’re happy with life. I’ve just listed what I reckon to be the key surveys; the ones that I try and make sure that I’m at my desk for and that I reckon can move the markets. Some, like the PMIs, reflect current conditions; others like the IFO and ZEW surveys, incorporate views on the next 6-months.

German IFO

Produced by the IFO research institute at Munich University, this qualitative survey is sent out to about 7000 firms representing manufacturing, construction, retail and wholesale sectors (but not the world of finance). Responses (usually around 90%) are weighted according to output.

The headline Business Climate Index is a composite of the current assessment and 6-month expectations balances. For the current assessment firms are asked if conditions are good, satisfactory, or poor. For the expectations balance firms are asked if the outlook is more, or less, favourable or unchanged.

The two indexes are combined to form a single figure where 100 represents the average balance for the year 2000.

This number is high on street cred because it’s hot off the press and represents the views of real firms, down on the street, not lofty economists and their spreadsheets. It also has a good history as a lead indicator for both German and Eurozone GDP.

French INSEE
The National Institute of Statistics and Economic Studies produces the French Business Survey. The sample covers 4000 firms from food and agriculture, manufacturing and oil refineries.

All questions are qualitative and responses are weighted by the firms output. Questions relate to output, inventories and prices over the previous 3 months and the following 3 months.

This release isn’t as big a deal as the German IFO, but it helps to build the bigger picture of the Eurozone economy.

German ZEW
ZEW is the German acronym for The Centre for European Economic Research (yep ZEW is more catchy and easier to remember). The ZEW is a survey of approximately 350 financial analysts, typically from investment research, finance or trading departments in Germany (though there is a small overseas element).

The headline Economic Sentiment Indicator is based on a single question, “In the medium term (6 months) the overall macroeconomic situation will: improve / no change / worsen / no estimation?” The figure produced is the percentage difference between positive and negative responses. The survey also asks a whole host of questions relating to other countries, bond yields, equities, currencies and commodities, but these don’t make the red strip at 9 in the morning.

The ZEW differs from the IFO survey in only reflecting opinion on the future six months rather than current six months. It also covers areas not within the scope of the IFO survey; one being the financial sector, the other being the overall economy rather than perceptions about firms’ own business.

Typically this survey comes out a week ahead of the IFO release.

PMI (Purchasing Manager Indices)
Along the same line as the UK PMIs and US ISM these indices are top drawer. They’re designed to give a qualitative view of business conditions across the individual and broad economies.

There are three broad indices: Manufacturing, Services and Retail. The Eurozone PMI measure is an aggregate of the individual country PMIs, weighted by each country’s contribution to that sector. These are released earlier on the same morning so you can get a flavour for how the Eurozone number is likely to come out. Over 5000 firms across the Eurozone are surveyed. As well as the sector PMIs, look out for a composite, composite, composite number giving a feel for the broader outlook across the spectrum of EU businesses.

A value of 50 represents neutral; a number above 50 suggests an expansion in the sector, below 50 implies a contraction.

This series has now got even faster with ‘flash estimates’ at the beginning of every month.

Manufacturing
The headline number, which is a valuable indicator of growth in manufacturing output, is a composite measure based on 5 qualitative categories:
New Orders
Production
Employment
Supplier Deliveries
Inventories

Unless you’ve got a damned good news service you’ll probably have to settle for the headline number, but that’s what’s likely to drive the instant market reaction anyway.

Services
The headline services PMI number isn’t a composite of several sub-sectors; it reflects the answers to a single question relating to the general level of business activity by that firm. However, the overall survey asks questions relating to business activity and expectations, employment, prices and new business.

Otherwise the game’s the same; above 50 reflects expansion, below 50 shows a contraction.

Retail
Also known as the Bloomberg Eurozone Retail PMI, the survey questions more than 1000 retail sales executives across Germany, France and Italy, which accounts for over 80% of the value of Eurozone retail sales.

The survey asks small and large retail outlets questions relating to reported and expected sales by sector, prices and margins, employment and inventories.

GFK German Consumer Confidence
GFK is a German market research outfit; it doesn’t quite have the high profile of the home-grown IFO and ZEW institute surveys, but it’s worth being aware of nevertheless.

This survey asks around 2000 consumers a range of questions regarding their views on the economy, their income expectations and their propensity to spend across 20 consumer goods and services sectors.

EU Economic Sentiment Indicator (ESI)
This index presents a broad measure of sentiment across the Eurozone economies. The headline Economic Sentiment Index is calculated from 5 sectoral indices:
Industrial
Consumer
Services
Construction
Retail

The survey spans around 100,000 firms and 21,000 consumers across the Eurozone, with the biggest weightings going to the industrial and services sectors. Here, a figure of 100 represents a level in line with the long-term average. This is another number that’s worth staying at your desk for, but doesn’t pack a punch like the IFO or ZEW surveys.

Honorary mentions should go to the conference board and OECD leading indicators and even the BNB Belgian Business confidence, but these don’t quite make the ‘hit the trade button’ league.

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