MacroScope

Optimism in Germany is roaring and consumers across the euro zone are starting to become less gloomy. But the latest hard economic data are a reminder of the difference between confidence that things are going to get better, and the hope that they will.

For the moment, we only have the latter.

Friday’s German Ifo business climate survey topped even the highest expectations, as did the ZEW economic sentiment indicator on Tuesday. Euro zone consumer confidence improved this month too, and the mood in financial markets has been largely buoyant since the start of the year.

The hope is that will translate into a growing euro zone economy, but that isn’t happening yet.

“The optimism is out of step with what current real evidence and logic tend to suggest,” argues David Brown of New View Economics.

“German economic confidence surveys seem to be showing more signs of economic spring, but the economy is still struggling with a massive millstone round its neck. The rest of the beleaguered euro zone economy.”

As 2011 draws to an unspectacular close, U.S. economic data are sending thoroughly mixed messages about the near-term path of the recovery. That’s not particularly reassuring given the still enormous risks emanating from Europe – but it’s better than the unequivocal weakness that prevailed during the first half of the year.

Consumer confidence offered some reassurance, jumping to an eight-month high in December and showing other encouraging signs as well as Eric Green of TD Securities explains:

The better than expected consumer confidence numbers (64.5) put confidence, like most measures of economic activity, back to the levels of early spring. Views on the labor market, however, look to be rising at a much better clip. The labor differential (between jobs plentiful and hard to get) continued to improve. That measure tracks the unemployment rate very well. It rose in December from -37.4  to -35.1. That remains exceptionally weak, but it is the trend that matters. That trend has improved decisively over the past several months and is now well above the spring levels that averaged closer to -39, and is the highest since the end of 2008.

Food and electricity bills are high. The cost of filling up at the petrol station isn't coming down much either. The U.S. economy is in trouble and suddenly the job isn't as secure as it seemed. Maybe that designer handbag and new car aren't such good ideas after all.

That's the kind of decision millions of middle class consumers in developing countries are facing these days. That's bad news for purveyors of everything from jeans to iphones  who have enjoyed double-digit profits thanks to booming sales in emerging markets.

Brazil is the best example of how emerging market consumers are tightening their belts. Thanks to their spending splurge earlier this decade, Brazilian consumers on average see a quarter of their income disappear these days on debt repayments. People's credit card bills can carry interest rates of up to 45 percent. The central bank is so worried about the growth outlook it stunned markets with a cut in interest rates this week even though inflation is running well above target

The latest State Street investor confidence index bears some scrutiny. The overall index dropped in February which would seem to be in line with other sentiment indicators such as The Conference Board's consumer confidence index and the German Ifo on business thinking.

But the State Street  fall was entirely due to bearish Asian sentiment. There were gains in the North American and European regional calculations. Also the overall, North American and European indices all came in above 100 -- which means that sentiment remains on the bullish side.

It begs the question of whether Asia is a) lagging b) leading or c) just out there on its own.