August 30, 2019

News in Charts: Fathom’s sentiment indicators reflect grim outlook for German manufacturing

by Fathom Consulting.

Fathom’s Economic Sentiment Indicators (ESIs) distil the information contained within numerous surveys into composite measures of underlying sentiment. Since peaking at the beginning of last year, the euro area ESI has fallen sharply almost one percentage point as growth slipped and sentiment soured following 2017’s economic boom. The decline in sentiment over the past two years is remarkable, with the gap that emerged between the hard and soft data now fully closed. Fathom had expected this to happen, with weaker sentiment (rather than higher growth) always likely to be the cause.

Refresh the chart in your browser | Edit chart in Datastream

The turnaround in sentiment is particularly striking in Germany; Fathom’s whole-economy ESI fell to 0.0% in July, its lowest level since 2009, amid trade uncertainty and ongoing weakness in the manufacturing sector. Indeed, the German ESI’s manufacturing sector sub-component is now deeply in negative territory. The weakness in manufacturing sentiment is also reflected in hard data (such as the new orders report), which appear to offer an equally pessimistic indication of where production is likely to go from here.

Refresh the chart in your browser | Edit chart in Datastream

Want more charts and analysis? Access a pre-built library of charts built by Fathom Consulting via Datastream Chartbook in Eikon.

The deterioration in sentiment through 2018, and the early part of 2019, trailed behind falls in production, with firms perhaps slow to recognise the trade shock and hence its persistence. Given the importance of trade to German manufacturers, it is hardly surprising that growth, and subsequently sentiment, have been hit hard.

Refresh the chart in your browser | Edit chart in Datastream


Refresh the chart in your browser | Edit chart in Datastream

Thus far, output in the non-manufacturing economy has remained relatively resilient which has limited the impact of the shock. However, if the manufacturing weakness persists and if it were to start spilling over into employment, then the downturn could spread to other sectors of the economy. Even if this does not happen, the relative importance of manufacturing to the German economy points to a high likelihood of a second consecutive quarterly contraction in GDP.

Refresh the chart in your browser | Edit chart in Datastream

The charts in this post have been created using Chartbook on Datastream. The Chartbook, created and maintained by Fathom Consulting, is a library of over 9000 charts, containing up-to-date macro and financial market data for over 170 countries. Whether it is a particular topic, country or variable you are interested in charting, the Chartbook has everything you need. Simply type search ‘cbook’ into your Eikon search bar or click the ‘Chartbook’ tab on Datastream to find out more.



Financial time series database which allows you to identify and examine trends, generate and test ideas and develop view points on the market.

Refinitiv offers the world’s most comprehensive historical database for numerical macroeconomic and cross-asset financial data which started in the 1950s and has grown into an indispensable resource for financial professionals. Find out more.

Get In Touch


We have updated our Privacy Statement. Before you continue, please read our new Privacy Statement and familiarize yourself with the terms.×