Jan — MNI analysts survey — Dec Revised
lowest median highest from
————————————————————————
Econ Sentiment 106.5 106.0 106.6 107.0 106.6 106.2
Industry 6.0 3.0 5.0 6.0 4.9 4.0
Services 9.2 na na na 9.6 9.8
Consumers -11.2 -11.4 -11.0 -10.0 -11.0 —
Retail 0.1 na na na 4.5 4.6
Construction -26.0 na na na -26.5 -26.2
————————————————————————
Business Climate: +1.58 na na na +1.38 +1.31

PARIS (MNI) – Economic morale in the Eurozone eroded marginally in
January, as the improvement in construction and especially industry
sentiment was offset by setbacks for services, consumers and
particularly for retailers, the European Commission said Thursday.

After an unexpected 1.3-point rise in December (revised up from
+1.1 point), the Commission’s sentiment indicator edged down 0.1 point.
It was the first decline in two years apart from last May, when the
series was revised.

Still, the current levels, along with the trends in other leading
indicators this month, point to sustained growth in 1Q.

Monthly gains were led by the Netherlands (+2.5 points) and France
(+0.8 point). Italy and Spain remained broadly unchanged, while Germany
sustained a decline (-1.7 points). In Germany, France and the
Netherlands, the headline index was above its long-term average.

Driven mainly by France, Italy and the Netherlands, Eurozone
industry sentiment gained 1.1 points in January to come within 0.6 point
of the record high in April 2007. Producers were more upbeat about order
trends, including export demand, and recent output, but less confident
about future production. Stocks of finished goods remained at a very low
levels.

The quarterly manufacturing survey released this month showed a
1.9-point rise since October in capacity utilization to 80.0%, now only
1.1 points below the long-term average.

The Eurozone flash factory PMI also signaled a further pick-up in
output (58.6) in January. While new orders lost a little steam, the
relatively high level of the component (57.7) points to solid support
from the demand side in the near term.

The Commission’s separate Business Climate Indicator was firmer in
January as well. After a 0.41-point rise in December, the index jumped
another 0.20 point in January to +1.58, boosted by a strong increases in
total orders, export orders and production, which offset an erosion in
production expectations.

“The level of the indicator is approaching historical peak reached
in spring 2007, suggesting that the recovery in industry will continue
in the coming months,” the Commission said.

After a 0.7-point downturn in December, sentiment in the services
slipped another 0.4 point on the back of 2.8-point drop in Germany to
stand 4.6 points below average. While firms said recent demand and
activity was weaker, they expected a recovery in the coming months.

By contrast, confidence in financial services, which is not
included in the overall sentiment index, gained 2.5 points after a
6.4-point recovery since October to stand more than 10 points above
average. The rise was based on recent activity and demand; expected
demand weakened somewhat.

The flash services PMI recovered in January (55.2), with new
business expanding at the fastest pace (55.4) since October 2007.
However, behind the strong Eurozone levels, there were few signs that
peripheral countries like Ireland and Spain were catching up with
Germany and France, PMI compiler Markit Economics noted.

The Commission’s flash estimate for consumer sentiment was revised
up by 0.2 point to show a 0.2-point dip to -11.2 in January. While
consumers were less worried about future job prospects, they expected
the overall economy and their personal financial situation to
deteriorate over the coming year.

Households noted a strong pick-up in recent inflation and expected
a further marked acceleration in the coming 12 months. Both components
are now close to long-term averages. They said they were spending more
for big-ticket items now, but their outlook for the coming year was
little changed from December.

The retail sentiment index fell back 4.4 points in January,
retracing most of the sharp rebound in December, with Germany again
setting the trends. Retailers said recent turnover had firmed but
expected a slowdown in the near term.

Construction morale recovered slightly but was still well below the
long-term average.

Sales price expectations rose in all business sectors in January to
above-average levels everywhere except for construction.

Hiring prospects improved in industry, the services and
construction, but weakened in the retail and financial services sectors.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

[TOPICS: M$XDS$,M$X$$$,MT$$$$]