German unemployment dropped a seasonally adjusted 10 basis points to 8.2% in May, an important call-out as unemployment is busting out across Europe. While we're not calling a top on German unemployment, the number should provide a tailwind for German confidence. For our fundamental view on the country see yesterday's post entitled "Germany Grinding It Out".
Today the European Commission released its May confidence numbers, which improved across nearly all industries. Overall economic confidence rose to 69.3 from 67.2 in April, a six-month high. Consumer sentiment stayed flat on the previous month, while industrial, services, and retail indices improved. Only construction dipped mildly. (See the chart below).
In conflict with the retail sales results is Bloomberg's purchasing managers index (PMI), which recorded that retail sales for the Eurozone declined to 47.1 from 48.4 in April, based on more than 1,000 executives compiled by Markit Economics.
We continue to follow European data points to monitor health, yet place greater emphasis on country-specific data when considering a position as we believe auto-correlation is dead. Due to the importance of the Union as a trading partner for European countries, improvements in fundamentals and confidence will benefit the whole.
In Europe we're currently long Sweden via the eft EWD. We're bullish Sweden on a fundamental basis and believe that exports will benefit from a weaker Kronor versus the Euro.
Matthew Hedrick
Analyst
