The US and Europe economic surprise indices have diverged dramatically recently. After the weakness in new orders during the summer, economists have lowered expectations for the US, but were since consistently surprised to the upside. In Europe the falling sovereign borrowing costs made some forecasters more sanguine about prospects for a recovery, which did not materialize. Instead the Eurozone saw consistent deterioration in the "core" economies (see discussion).
As an example of expectations that were too optimistic, Germany's factory orders, industrial production, and the ZEW Index (see post) showed that Germany has been unable to decouple from the periphery (see post). All three indicators helped lower the Europe Economic Surprise Index.
|Germany Factory Orders (source: Econoday)|
|Germany Industrial Production (source: Econoday)|
|Germany ZEW Index (source: Econoday)|
Forecasters are now adjusting their expectations and this divergence between the two surprise indices should narrow in the coming months.