13/2/2013: CESIfo Index shows improvements in Global Economy

CESIfo institute has issued its analysis of the global economy and... some good news: per CESIfo index tracking global growth, world economic climate indicator finally is up after two consecutive declines.


The increase in the index "was mainly driven by significantly more positive assessments of the 6-month [forward] economic outlook." At the same time, "assessments of the current economic situation improved only slightly. After 6 months of stagnation, the prospects for the world economy seem to be brightening."

• Asia led the global index rise, with region index "now higher than its long-term average once again. Both assessments of the current economic situation, and especially expectations, have brightened considerably." 
• In the case of North America "the rise in the economic climate indicator was mainly due to improved assessments of the current economic situation. Despite the improvement, the current economic situation is not completely satisfactory in this region." 
• Per CESIfo release: "The current economic situation is also unfavourable in Western Europe. Assessments of the 6-month [forward] economic outlook, on the other hand, were significantly more positive, which led to a moderate overall improvement in the economic climate." 

CESIfo Index panel "on average expect short-term interest rates to remain largely unchanged over the next six months. However, they believe that long-term interest rates are set to increase slightly. On worldwide average, economic experts expect moderate growth in the value of the US dollar over the next six months."

30/1/2013: German Economy: Returning to zero growth in January 2013

Germany's CESIfo published the latests (January 2013) assessment of the state of the German economy in Manufacturing and these are slightly more upbeat than at the end of Q4 2012, albeit with some clear seasonal supports.

"In manufacturing the business climate indicator continued to rise. Manufacturers are more satisfied with their current business situation than last month. The improvement in expectations with regard to future business developments continued into the New Year. Optimism is returning. After three successive declines, capacity utilisation rates also rose."

As per data below, in manufacturing 'optimism' is not exactly 'returning', but rather 'pessimism is receding', as business expectations remain below 0 on balances:

"In wholesaling, on the other hand, the business climate clouded over. Wholesalers are less satisfied with their current business situation and slightly more pessimistic about future business developments. In retailing the business climate indicator rose somewhat. This was due to a slightly more positive assessment of the business situation, while retailers’ business expectations remained unchanged.

In construction the business climate index rose sharply. This was primarily due to far more optimistic expectations, which last reached such a high level in March 2012. Assessments of the current business situation also improved."

It is worth noting that in Construction sector, it was business expectations that drove overall index up sharply and these are exceptionally seasonally-driven:

 However, as balances data below shows clearly, three of five sub-sectors continue showing weaknesses:

Overall, the three core aggregate series are above 100 for the first time since May 2012 (good news), but at levels that are signalling stagnant or very weak growth.

• Climate indicator reading is at 104.2 - only sixth highest reading in last 12 months, and substantially below 108.2 reading in January 2012;
• Situation indicator is at 108.0, which is only 10th highest reading in last 12 months, and well below 116.3 recorded a year ago.
• Expectations are at 100.5, marking 5th highest reading in 12 months, down marginally on 100.7 in January 2012.

In terms of overall impact on the euro area, the above figures suggest that the January 2013 eurocoin indicator-based forecast (see details here) of -0.4% growth in January 2013 should be more moderate. Not enough data yet to recompute the actual forecast figure from -0.4%, but I believe it can be closer to -0.2-0.1%.