What’s Driving Consumer Confidence in the Eurozone?



Consumer confidence rose to -6.0% in November

Household expenditure forms an integral part of an economy. It accounts for ~55.4% of the Eurozone’s GDP (gross domestic product). A rise in household expenses reflects growing consumer confidence towards the economy.

According to the DG ECFIN’s (Directorate-General for Economic and Financial Affairs) flash estimate, consumer confidence rose by 1.3% to -4.4% in the EU (European Union) in November. It rose by 1.6% to -6.0% in Eurozone in November—compared to October. Although it improved, consumer confidence is still in negative territory. Over the past month, the iShares MSCI Eurozone ETF (EZU) fell 0.52% as of November 20. EZU fell 5.9% from a year ago.

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Economic sentiment remains unchanged

The economic sentiment remained broadly unchanged in both the Eurozone and EU. In the Eurozone, it rose by 0.3 points to 105.9 in October—compared to the previous month. In the EU, it fell by 0.1 points to 107.5 in October 2015—compared to September.

Industrials, retail trade, and construction rose

The industrial confidence indicator carries a 40% weight in the economic sentiment index. In October, it rose by 0.3 points compared to September. The retail trade and construction grew by 2.3 points and 2.5 points, respectively. However, the rise was offset by a fall in services and consumer confidence. Services confidence and consumer confidence each fell by 0.5 points in October.

Companies like Sanofi (SNY), Banco Santander (SAN), and Total (TOT) fell 10.1%, 4.1%, and 2.2%, respectively, as of November 23 compared to the previous month. Daimler (DDAIF) and SAP (SAP) rose by 0.94% and 4.7%, respectively, for the same period.

The rise in the consumer confidence highlights consumers’ growing optimism. With the holiday season ahead, an additional rise is expected in the consumer confidence. However, the terror attack in Paris on November 13 could impact consumer sentiment in the near term.

Consumer confidence drives the inflationary pressure in an economy. In the next part, we’ll look at how consumer confidence could impact German producer prices.


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