Transcript Slide 1

BDO Euro Area Quarterly Business Trends Indices
July 2010
Introduction
The BDO Euro Area Quarterly Trends Indices are ‘polls of polls’ that pull together the
results of all the main business surveys. The July Quarterly Indices update the results in
the ‘BDO Business Trends Report’ produced in August 2010. The latest results include
new business surveys carried out between the 1st July and the 31st July 2010.
Euro Area Summary
Index
BDO Output Index
BDO Optimism Index
BDO Inflation Index
BDO Employment Index
KEY:
Current
Confidence
Movement
in Month
Index level: July
compared to June

101.2 in July from 99.0 in April
 ()
98.9 in July from 98.4 in April

 ()
91.4 in July from 90.4 in April
98.9 in July from 98.1 in April
 = above 100;  = highest in 12 months;  = below 100;   = lowest for 12 months
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BDO Euro Area Quarterly Business Trends Indices
July 2010
Euro Area Key Findings
All of the Indices for the Euro Area have recorded their highest reading in 12 months in
July. The Euro Area continued to show steady, yet slow, recovery over the past quarter.
Economic output increased by 0.2% quarter-on-quarter in the first three months of 2010
compared, following growth of 0.1% in final quarter of 2009. The BDO Output Index
suggests that for the remainder of 2010 output is likely to continue to grow, but at a level
below the long term average trend.
The BDO Employment Index suggests that the Euro Area labour market will continue to
stabilise over the following quarter. Unemployment remained steady at 10.0% in June.
Geographical variations within the euro area are significant. Whereas the northern region,
including countries like Germany, Netherlands and Denmark, have seen the strongest
recovery in employment, countries around the Mediterranean continue to experience high
unemployment rates, with Spain the highest with a 20.0% unemployment rate.
Inflation was up 1.7% in July from 1.4% in June. As is evident from the BDO Inflation
Index, inflationary pressure are likely to remain weak for the remainder of 2010. With
inflation likely to remain under the European Central Bank’s (ECB) target rate over the
coming quarter, it is unlikely that base rates will rise over the medium term.
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BDO Euro Area Quarterly Business Trends Indices
Euro area growth to remain weak for
the remainder of 2010
The BDO Output Index recorded a score of
98.5 in July, up from 97.6 in April. This is the
highest score since April 2007.
5
•
3
The BDO Optimism Index also edged up,
reaching 98.9 in July from 98.4 in April. This is
also the highest reading since April 2007.
• This suggests that output in the euro area over
the next two quarters may continue gain
traction.
4
2
1
0
-1
• With a score of between 95 and 100 signalling
-2
below long term average growth rates, euro area
output is likely to remain sluggish into 2011.
-3
•
However, memories of the Greek crises seem
to be gradually fading, confidence slowly reemerges in the euro area.
BDO Euro Area Output Index (scaled) vs
Euro Area GDP Growth
-4
-5
2000Q2
2000Q4
2001Q2
2001Q4
2002Q2
2002Q4
2003Q2
2003Q4
2004Q2
2004Q4
2005Q2
2005Q4
2006Q2
2006Q4
2007Q2
2007Q4
2008Q2
2008Q4
2009Q2
2009Q4
2010Q2
•
July 2010
Source: PMI, Bank of England, CBI and the Office for
National Statistics
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BDO Euro Area Quarterly Business Trends Indices
The euro area labour market shows
signs of stabilisation
The BDO Employment Index edged up slightly
in July to 98.9 from 98.1 in April. This is the
highest reading since April 2008.
• Eurozone unemployment remained stable at
10.0% in June.
•
The latest data from the BDO Employment
Index suggests a flattening out of unemployment
over the third quarter.
•
The BDO German Index suggests that
unemployment will fall over the coming quarter,
while French and Italian unemployment rates
may not have turned the corner yet.
•
Risks ahead lie in the public sector, as many
countries pursue a policy of fiscal austerity.
BDO Euro Area Employment Index (scaled)
vs Euro Area change in unemployment rate
35
30
25
20
15
10
5
0
-5
-10
-15
2000Q2
2000Q4
2001Q2
2001Q4
2002Q2
2002Q4
2003Q2
2003Q4
2004Q2
2004Q4
2005Q2
2005Q4
2006Q2
2006Q4
2007Q2
2007Q4
2008Q2
2008Q4
2009Q2
2009Q4
2010Q2
•
July 2010
BDO Euro Area Employment Index (scaled)
Euro Area change in unemployment rate
Source: PMI, Bank of England, CBI and the Office for
National Statistics
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BDO Euro Area Quarterly Business Trends Indices
Inflationary pressures in the euro
area remain weak
BDO Inflation Index (scaled) vs Euro Area
change in inflation
The BDO Inflation Index edged up to 91.4 in
July from 90.4 in April. The is the highest score
since January 2008 and is the third quarter in
succession in which this index has risen.
5
•
2
Euro area inflation was 1.7% in July,
compared with 1.4% in June. This remains below
the European Central Bank’s target rate.
•
The BDO Inflation Index suggests that
inflationary pressure are likely to remain weak in
the Euro Area over the coming quarter.
•
As such it is likely that the European Central
Bank will keep base rates on hold over the next
quarter and possibly into 2011.
4
3
1
0
-1
-2
-3
-4
-5
2000Q2
2000Q4
2001Q2
2001Q4
2002Q2
2002Q4
2003Q2
2003Q4
2004Q2
2004Q4
2005Q2
2005Q4
2006Q2
2006Q4
2007Q2
2007Q4
2008Q2
2008Q4
2009Q2
2009Q4
2010Q2
•
July 2010
BDO Euro Prices Index (scaled)
Euro Area Inflation
Source: PMI, Bank of England, CBI and the Office for
National Statistics
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BDO Euro Area Quarterly Business Trends Indices
July 2010
BDO Eurozone Indices to July 2010
Optimism Index
Output Index
Inflation
Emp
Manf
Serv
Total
Manf
Serv
Total
Jul-07
99.8
99.3
99.4
102.4
98.7
99.7
101.4
104.0
Oct-07
99.2
99.4
99.3
101.6
98.6
99.3
102.9
104.1
Jan-08
99.1
98.8
98.8
100.8
97.2
98.1
103.4
104.4
Apr-08
98.7
98.1
98.2
99.1
96.3
97.0
104.8
104.2
Jul-08
98.5
97.7
97.9
96.8
95.3
95.7
108.3
100.6
Oct-08
96.8
95.8
96.0
89.8
94.0
93.0
103.3
99.3
Jan-09
92.6
94.6
94.1
83.6
91.9
89.8
100.5
92.1
Apr-09
85.2
93.9
91.8
84.9
91.4
89.7
90.8
83.2
Jul-09
86.9
94.9
92.9
87.2
92.4
91.0
86.9
93.4
Oct-09
92.3
96.3
95.2
93.1
94.5
94.1
87.1
91.7
Jan-10
95.7
98.6
97.8
96.1
96.3
96.2
88.6
97.0
Apr-10
96.8
99.1
98.4
99.0
97.2
97.6
90.4
98.1
Jul-10
98.9
99.0
98.9
101.2
97.7
98.5
91.4
98.9
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BDO Euro Area Quarterly Business Trends Indices
July 2010
BDO German Indices to July 2010
Optimism Index
Output Index
Inflation
Emp
Manf
Serv
Total
Manf
Serv
Total
Jul-07
99.0
99.4
99.3
105.3
99.4
100.9
96.7
107.3
Oct-07
99.1
99.6
99.5
102.6
99.5
100.3
95.9
106.8
Jan-08
98.3
99.4
99.1
100.8
99.4
99.8
99.0
108.6
Apr-08
96.9
98.9
98.4
99.7
98.7
98.9
101.0
106.5
Jul-08
97.7
98.5
98.3
98.1
98.9
98.7
105.0
101.1
Oct-08
96.7
98.2
97.8
86.9
98.4
95.5
100.1
101.6
Jan-09
92.9
97.6
96.4
74.4
98.1
92.1
94.0
86.4
Apr-09
84.3
96.6
93.5
81.1
97.8
93.5
82.9
50.4
Jul-09
86.1
96.5
93.9
85.6
97.8
94.7
77.4
95.7
Oct-09
92.3
96.9
95.7
94.1
97.2
96.4
80.9
90.0
Jan-10
95.7
98.0
97.4
97.4
98.4
98.1
80.1
100.5
Apr-10
97.7
98.5
98.3
103.3
98.8
99.9
81.1
102.1
Jul-10
101.7
98.3
99.2
105.3
98.1
99.9
85.0
102.3
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BDO Euro Area Quarterly Business Trends Indices
July 2010
BDO French Indices to July 2010
Optimism Index
Manf
Serv
Output Index
Total
Manf
Serv
Inflation
Emp
Total
Jul-07
102.5
100.1
100.7
98.8
100.6
100.2
93.8
101.3
Oct-07
101.4
100.7
100.8
100.5
100.2
100.3
101.4
101.1
Jan-08
101.6
99.6
100.1
101.9
98.3
99.1
98.6
99.3
Apr-08
103.1
99.0
99.9
98.0
98.4
98.3
101.4
101.2
Jul-08
102.1
98.2
99.1
93.6
96.5
95.8
105.1
99.3
Oct-08
98.3
93.9
94.9
84.2
93.7
91.5
95.2
96.5
Jan-09
91.2
92.0
91.8
86.0
89.4
88.6
98.9
96.3
Apr-09
83.4
90.6
88.9
86.5
88.0
87.6
92.7
91.4
Jul-09
84.7
93.1
91.2
87.2
90.9
90.1
86.4
90.0
Oct-09
92.5
95.4
94.8
94.7
94.1
94.3
78.1
92.5
Jan-10
98.4
99.7
99.4
96.7
97.8
97.6
80.9
92.7
Apr-10
97.8
99.9
99.4
95.3
98.6
97.9
90.2
94.5
Jul-10
97.5
100.0
99.4
99.3
98.9
99.0
84.7
95.9
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BDO Euro Area Quarterly Business Trends Indices
July 2010
BDO Italian Indices to July 2010
Optimism Index
Output Index
Inflation
Emp
Manf
Serv
Total
Manf
Serv
Total
Jul-07
96.1
96.9
96.7
98.6
93.9
95.3
104.9
102.4
Oct-07
97.0
96.1
96.4
96.6
92.3
93.6
104.6
102.8
Jan-08
96.2
95.0
95.4
95.8
90.1
91.8
104.9
103.7
Apr-08
95.1
95.1
95.1
93.3
90.0
91.0
108.3
101.6
Jul-08
94.7
93.1
93.6
89.3
89.2
89.2
104.1
98.2
Oct-08
93.8
91.8
92.4
84.3
87.7
86.7
100.5
98.9
Jan-09
89.9
93.0
92.1
77.0
87.0
84.0
91.4
97.6
Apr-09
92.1
94.0
93.4
79.4
87.4
85.0
86.8
93.4
Jul-09
91.9
96.1
94.8
83.5
89.4
87.6
92.1
94.4
Oct-09
91.6
98.2
96.3
87.1
92.7
91.0
90.3
95.3
Jan-10
93.1
98.8
97.1
93.0
94.6
94.1
95.1
94.0
Apr-10
98.2
100.2
99.6
97.5
99.0
98.5
92.1
93.2
Jul-10
94.8
98.8
97.6
94.9
99.2
97.9
93.6
95.8
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BDO Euro Area Quarterly Business Trends Indices
July 2010
Methodological Notes
• The BDO Quarterly UK and euro area Business Trends Indices are prepared on behalf of BDO LLP by the centre for economics and business research ltd, a leading independent
economics consultancy. cebr has particular strengths in all forms of macroeconomic and market forecasting for the UK and European economies and in the use of business survey
techniques.
• The UK indices are calculated by taking a weighted average of the results of all the main business surveys carried out during the last three months. They incorporate the results of the
quarterly CBI Industrial Trends Survey; the CBI Distributive Trades Survey; the CBI/PriceWaterhouseCoopers Financial Services Survey; the British Chambers of Commerce Quarterly
Economic Survey; the Institute of Directors Business Opinion survey; the Chartered Institute of Marketing’s Marketing Trends Survey; and the Chartered Institute of Purchasing and
Supply’s Surveys of Manufacturing and Services.
• The Euro area indices are calculated by taking a weighted average of the results of Europe’s main business surveys. They incorporate the results of the German IFO surveys, French
INSEE surveys, Italian ISAE surveys, plus the main business surveys from the Austrian WIFO, Belgium National Bank, Spanish MCYT, Greek Foundation of Economics and Industrial
Research, Irish Economic and Social Research Institute, the STATEC survey from Luxembourg, the Confederation of Finnish Industry and Employers, the Dutch central Bureau of
statistics and the Portuguese INE surveys as well as the Chartered Institute of Purchasing and Supply’s Surveys of Manufacturing and of Services for Europe.
• Taken together the surveys cover over 11,000 different respondents from companies employing approximately five million employees in the UK. The respondents cover a range of
different industries and a range of different business functions. Together they make up the most representative measure of business trends available.
• The surveys are weighted together by a three stage process. First, the results of each individual survey are correlated against the relevant economic cycles for manufacturing and
services. This determines the extent of the correlations between each set of survey results and the relevant timing relationships. Then the surveys are weighted together based on their
scaling, on the extent of these correlations and the timing of their relationships with the relevant reference cycles. Finally, the weighted total is scaled into an index with 100 as the mean,
the average of the past two cyclical peaks as 110 and the average of the past two cyclical troughs as 90.
• Based on the relative importance of each of the Euro area countries in terms of contribution to GDP, the country indices have then been weighted to produce the UK and EU index for
output, optimism, unemployment and prices.
• The results can not only be used as indicators of turning points in the economy but also, because of their method of construction, as leading indicators of the rates of inflation and
growth. The figures show how the scaled indicators relate to inflation and growth, and forecasts based on the BDO indices can be read from these charts.
• The BDO optimism indices collate the results of surveys of business confidence. These act as a leading indicator of GDP growth two quarters ahead. So the April index, published in this
report, is a leading indicator of GDP growth in quarter three of 2010.
• The BDO output indices collate the results of surveys of business turnover or output expectations. These act as a leading indicator of GDP growth in the next quarter. So the April
index, published in this report, is a leading indicator of GDP growth in the second quarter of 2010.
• The BDO inflation indices collate the results of surveys of business price expectations. These act as a leading indicator of changes in price inflation measured by the Consumer Price
Index one quarter ahead. So the April index, published in this report, is a leading indicator of rate of change in the GDP deflator in quarter two of 2010.
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