Wednesday, May 27, 2009

Global surveys tell similar stories: confidence is improving

Taken separately, one can find many reasons not to rely on survey results, especially those from consumers. But put them together, and global survey results indicate that economic stabilization is afoot.

The chart illustrates consumer and business climate survey results through April 2009 for Japan and the Eurozone and through May 2009 for Germany and the US. The indices are normalized to 1995 for comparison. Except for the Eurozone, which saw its first improvement in economic sentiment since May 2007, the indices have been improving for several months now, with the US showing a sizable increase in May. Here are some highlights:

From the US Conference Board's measure of consumer confidence:
Continued gains in the Present Situation Index indicate that current conditions have moderately improved, and growth in the second quarter is likely to be less negative than in the first. Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months.
From the European Commission's Economic Sentiment results:
The rebound in the ESI resulted from a clear improvement in sentiment in industry and among consumers, which in both regions rose by the same amount (3 points), and a smaller increase in services (+1 point in both regions).
From the German Ifo Business Climate survey:
Although the firms have again assessed their current business situation more unfavourably than in the previous month, they have given clearly fewer poor assessments of their six-month business outlook. This points to a gradual stabilisation of economic output at a low level.
Green shoots, yellow weeds, of course there is a plethora of economic issues with which to worry. However, the business cycle is likely approaching a trough in key economies.

Rebecca Wilder


  1. Hey Rebecca,

    I remember when the economic downturn first started, phrases like "when the U.S. sneezes the rest of the world catches its cold" (or something close to that). But the general consensus was when the U.S. declines, the rest of the world will soon follow (economically speaking).

    Do you think it's the same with recovery? Will the U.S. lead the rebound, or will other countries lead the economic comeback?

    Nice post,

  2. Hi Tim,

    Given that the US has passed its pain on to the rest of the world via reduced import demand, it seems that the opposite will occur as our policy measures slowly work their ways into trade flows. It is likely that the US current account deficit will start to grow again.

    Thanks for visiting! Rebecca


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