April Eurozone Leading Economic Index down, The Conference Board

The April Eurozone Leading Economic Index declined slightly (0.1%) compared to March, driven mainly by the falls in the Economic Sentiment Index and Markit Business Expectations index (services), says The Conference Board.

Eurozone LEI

The for six-month period up to the end of April 2014, the Leading Economic Index (LEI) rose by 2.6% (5.2% annually), compared to 3.4% (7% annually) during the previous six months.

The Conference Board says the strengths among the leading indicators continue to be widespread, with all of its 7 components increasing during the October 2013 to April 2014 period.

In the month of April (compared to March), four of the seven LEI components contributed positively, as follows (in order of size):

  • Interest rate spread
  • The EURO STOXX Index
  • Real money supply
  • Manufacturing.

The following components made contributed negatively to April’s figure (compared to March):

  • Services
  • The Economic Sentiment Index
  • Residential building permits.

The April Eurozone Leading Economic Index now stands at 111.4 (2004=100). According to revised data, it rose by 0.2% in March and 0.1% in February.

Eurozone CEI unchanged in April

The CEI (Coincident Economic Index) for the Eurozone, which represents a measure of current economic activity, remained the same in April (compared to March), preliminary estimates show.

The CEI over the 6-month period ending in April 2014 rose 0.4% (0.8 annually), versus 0.1% during the previous six months. All CEI components advanced over the 6-month period.

For April (versus March), out of the four CEI components:

    • Employment increased
    • Retail fell
    • Industrial production remained unchanged
    • Manufacturing turnover remained unchanged.

April Eurozone CEI stood at 101.4 (20004=100), unchanged from March and 0.1% higher than February.

Real GDP (gross domestic product) grew by 0.8% (annualized) in Q1 2014, compared to 0.9% in Q4 2013.

The Conference Board wrote:

“The LEI has been relatively flat in 2014, after trending upwards in the second half of 2013. As a result, its six-month growth rate has moderated in recent months. The CEI has improved slightly over the past several months, as has its six-month growth rate.”

“Taken together, the recent behavior of the composite indexes suggests that economic growth is not likely to accelerate, but will remain moderate in the near term.”

April Eurozone Leading Economic Index

(Source: The Conference Board)

Eurozone – slow growth and deflation risk

With inflation way below the European Central Bank’s target of 2%, and unlikely to come anywhere near it over the medium term, ECB president Mario Draghi said he and his team are seriously considering a change in policy in order to prevent a deflationary spiral.

The Markit Purchasing Managers’ Index (PMI) slipped from 54 in March to 53.9 in April. However, the figure is slightly encouraging because anything over 50 suggests growth.

There is concern however, over the French economy, which is starting to look more like the sick man of Europe, while the Germany economy accelerates.