Survey data released this week provide mixed signals with an improvement of consumer confidence, a weakening of the ifo business climate index in Germany and a stabilisation of the INSEE indicator in France. The IHS Markit PMIs show a stabilisation in recent months in manufacturing, at a subdued to low level, and in services, at a more satisfactory level. Several drivers of domestic demand remain supportive. Nevertheless, unease remains, mainly for reasons on which the eurozone has no control and where the risk of further tariff increases is top of the list.
Against a background of trade tensions between the US and China, economic policy uncertainty remains very high. Uncertainty of German companies, measured by the dispersion in their assessment of the business environment, is no longer increasing, yet remains at a high level. Uncertainty of US companies had dropped at the start of the year, but has now rebounded a bit. Geopolitical risk, measured using news coverage, has been on a rising trend since early 2013, although it has eased recently. Uncertainty based on the dispersion of the stock market performance of individual companies has declined since the start of the year.
