Monday, September 28, 2015

Economic Summary for the week ended 21st Sep 2015

Whilst all focus was on the Fed last week, some important European data points will be released this week. Eurozone consumer confidence is released on Tuesday and PMIs on Wednesday.

Consumer confidence is close to pre-crisis highs but we believe it can rise further in the medium term. Eurozone unemployment has been falling steadily over the last two years and is now showing signs of falling at a faster pace. The chart below shows that the change in the unemployment rate is closely linked with consumer confidence. As consumer confidence increases consumers spend more, which boosts the economy and reduces unemployment. This in turn further boosts consumer confidence creating a virtuous cycle. This positive feedback loop still has plenty of room to run in the Eurozone given that unemployment remains very high and therefore has the potential to fall much further. 

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