Sentix: The recovery in expectations brings a faint ray of hope to the eurozone

Investor confidence regarding economic activity in the euro area rose more than expected in November 2023, according to the latest report from Sentix GmbH (see chart).

The aggregate index rose to -18.6 points, the highest level since June 2023, from -21.9 points in the previous month, while the current situation index increased by 0.2 points, to -26 .8 points, and the expectations index rose to -10 points, the highest level since February 2023, from -16.8 points.

"There is a small ray of hope in the euro zone", in the conditions of a "surprising recovery of expectations", according to the Sentix report. However, the negative value of the expectations index shows that "investors continue to appreciate that the economic situation in the next six months will be weaker than the current situation, which is considered very weak".

The report also mentions that "weak economic development and improving inflation prospects fuel hopes for an end to the current cycle of interest rate hikes by central banks".

Against the backdrop of improving global expectations, the Eurozone, Germany and Eastern Europe were maintained in the "recession" category. The United States and Japan were moved to the "stabilization" category, from the "temperance" category, and the economies of Asia, excluding Japan, were maintained in the "stagnation" category.

In the euro area's largest economy, Germany, the aggregate confidence index rose slightly by 4.8 points to -26.3 points, the highest level since June 2023. The current situation index increased by 1.7 points, up to -37.8 points, and the index of expectations for the next six months increased by 8.3 points, up to -24 points.

"The economic climate in Germany remains tense and the economy is in recession", according to Sentix analysts.

Across the ocean, "the US economy remains robust" amid a surprising 6.2 point rise in the current conditions index to 18 points, the highest level since April 2022. The aggregate confidence index rose to 5 points, from to 0.8 points, against the background of the increase of the expectations index by 2.2 points, up to -7.3 points.

The aggregate confidence index for Asia, excluding Japan, increased in November 2023 by 2 points, up to 2.7 points, while the expectations index increased up to 4.3 points, from 0.5 points, and the current situation index increased by 0.3 points, up to 1.3 points.

Japan's economy entered the "stabilization" category in November 2023, as the aggregate index of investor confidence increased by 1.2 points to 4.5 points, the highest level since March 2022, amid an increase in the expectations index by 4 points, up to 0.5 points, and a decrease of 1.8 points in the current situation index, up to 8.5 points.

Eastern Europe was maintained in the "recession" category due to the increase of the aggregate index by 2 points, up to -21.1 points. The current situation index rose to -29 points, from -30 points, and the expectations index rose to -12.8 points, the highest level since February 2023, from -16 points.

The situation of the Swiss economy improved slightly, as the aggregate confidence index rose to -2.3 points, from -3.7 points in the previous month. The current situation index increased to 3.5 points, from 0.5 points, and the expectations index decreased to -8 points, from -7.8 points in the previous month.

For the Austrian economy, the aggregate index decreased significantly, up to -20.7 points, from -26.3 points. The expectations index increased to -15 points, from -23 points, while the current situation index increased by 3.2 points, to -26.3 points.

Latin America remained in the "decline" category due to the stagnation of the aggregate confidence index -11.5 points, while the current situation index decreased by 1.8 points, to -16.8 points, the lowest level since January 2023 , and the increase of the expectations index by 2 points, up to -6 points.

Against the background of general trends of stagnation, the aggregate index of confidence at the level of the global economy registered an increase to -3.3 points, from -5.8 points, while the index of the current situation increased by 1.2 points , up to -3.8 points, and the expectations index registered an increase of 3.8 points, up to -2.8 points.

Sentix's confidence index for November 2023 was built on the basis of a survey in which 1,203 investors participated, of which 253 were institutional investors.