Eye On The Euro Zone: That Shrinking Feeling

EU Inflation plunges, so does confidence…

While we were celebrating the holiday several key economic data points emerged from Europe.

Consumer inflation in the Eurozone declined by the largest margin since 1991 as November CPI declined to 2.1% year-over-year from 3.2% in October and unemployment increased. This decline will provide more ammo to the ECB in its rate cut decision next Tuesday. The market has largely factored in a 75 basis point cut.

New Eurozone sentiment survey data released yesterday plunged lower than anticipated by surveyed economists with many of the major EC confidence indicators coming in the lowest levels for the past decade:

• Economic Confidence: Oct. 74.9 vs. 80 in Sept. (Revised)
• Consumer Confidence: Nov. -25 vs. -24 in Oct.
• Industrial Confidence: Nov. -25 vs. -18 in Oct.
• Service Confidence: Nov. -12 vs. -6 in Oct.
• Retail Confidence: Nov. -13 vs. -13 in Oct.

Euro Zone unemployment for October picked up by 0.1% since September to reach 7.6%. An outlier to the positive side was Germany. November unemployment in Germany arrived at 7.5% (seasonally adjusted), unchanged since October while ILO definition figures from the Federal Labor Office actually showed a decrease of 0.1% to 7% in October.

This job data fits with our thesis on the German economy which we remain long via the EWG ETF. We continue to believe that Germany is the best competitively positioned major economy in the EU. Stability and liquidity is what Germany is long – we like both.

Andrew Barber
Director

Keith McCullough
CIO

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