The Weekly Brief (21 September 2015)Contributor Global Markets Insights Strategy Team
Whilst all focus was on the Fed last week, this week some important European data points will be released. Eurozone consumer confidence is released on Tuesday and the 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 starting to fall 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 Europe given that unemployment remains very high and therefore has the potential to fall much further.
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