Today I'm looking at the series of Eurozone confidence indicators released today, which give the strongest signals we've seen for just over a year. The growth-tracking economic sentiment index rose 7.6pts to 101, the best since February last year - this index amalgamates confidence indicators for industry, for services, and for consumers undertaken by all Eurozone member countries. That's a huge footprint, so it's no surprise that it has a good track record at, yes, tracking changes in economic growth. In fact, I think it's one of the most useful single-monthly data-points for the Eurozone that we have. So I take it seriously.
The problem is that this quite dramatic vote of confidence almost certainly reflects attitudes before it because obvious that the Eurozone was being hit by a third wave of covid, which was going to lead to new and hardened lock-downs, without the expectation of early release. Because of the survey's huge footprint, these results are almost certainly out of date. Some of this is obvious. For example, France's consumer confidence index for March, which forms one input into these indexes, were reported today up 3pts to 94. That was better than expected, but then we learn that the data was collected between February 24th and March 20th.
Like yesterdays sharply positive Markit PMIs for the Eurozone - which were all far stronger than expected - the timing matters. Those PMIs also relied on the surveys undertaken between March 12 and March 23rd.
But if you look at the coronavirus data you can see the rise in the 7 day average of covid cases arriving only beyond doubt rather recently - I'd say around 18th March for France and 20th March for Germany. That terrible news arrived too late to filter through to these surveys.
So I take two things from them. First, unless there's a health miracle in the next couple of weeks, the confidence recorded in today's surveys will be reversed and dashed in April's survey. But second: these surveys show what would have happened - what would have been the instinctive dramatic surge in confidence if, in fact, the end of the pandemic really was in sight for the Eurozone, so they are a a harbinger of what to expect in countries where the pandemic is already beaten back, and also in due course what we can expect eventually in the Eurozone. Just not now, unfortunately.
