According to the first estimate, University of Michigan consumer confidence jumped to its highest level since September 2007, while the consensus was looking for a marginal worsening in consumer sentiment in August. The headline index rose from 78.3 to 83.1, while a drop to 78.0 was expected. The breakdown shows that both the economic conditions (88.6 from 85.7) and economic outlook (79.5 from 73.5) sub-index rose in October. At the same time, inflation expectations eased as one-year inflation expectations dropped from 3.3% to 3.1% and 5-year ahead inflation expectations fell from 2.8% to 2.6%. Recently, all consumer confidence indicators point in the same direction, showing a significant improvement in consumer sentiment. Probably the housing market recovery and sharp drop in the unemployment rate last month boosted consumer sentiment, together with the Fed’s commitment to revive the US labour market. It will be interesting to see whether the improvement in sentiment among consumers encouraged them to increase spending, which would be an encouraging sign for Q4 growth.
EMU: industrial production remarkably strong in August
Euro zone industrial production came out remarkably strong in August, rising for a second straight month. Industrial production increased by 0.6% M/M, while the consensus was looking for a decline by 0.4% M/M. The breakdown shows that strength was broad-based as production of durable (3.9% M/M) and non-durable (1.3% M/M) consumer goods, capital goods (0.7% M/M) and energy (0.9% M/M) increased in August, while production of intermediate goods stabilized. Country data were already partly known, but the overall picture shows strong performances in the peripheral countries: Portugal (6.8% M/M), Greece (2.5% M/M), Italy (1.7% M/M) and Spain (1.3% M/M). Also in the core countries as France (1.5% M/M) and the Netherlands (0.5% M/M) production rose in August, while German production fell (by 0.4% M/M) after a strong performance in July (1.3% M/M). The strong performance was not really a surprise after several national data were already released. Nevertheless, they suggested that seasonal factors may have distorted the data because many factories are closed in August for the summer break. As the underlying picture is strong too, no all should be due to seasonal factors. Euro zone production is now up in both July and August, suggesting that the Q3 GDP data could be less worse than could be feared.