Artprice Market Confidence Index is Morose in Europe and Improving in the USA

PARIS, February 5 – With just three months to go before the highly publicised Impressionist and Modern Art Evening Sale in New York, Artprice has decided to reveal art market sentiment as indicated by analysis of its new market barometer: Art Market Confidence Index (R). The AMCI (R) gives a reading in real-time and its fluctuations indicate the reactions of the principal art market players worldwide to specific events (stock market swings, geopolitical events, major auction news or any other news likely to impact the global economy).

Activated on 28 January 2008, the AMCI’s first reading at 2:23 pm was down 11.10 points. At that time of day, 94% of the first thousand opinions taken came from European art market players. In effect, as the day progresses, so the sample population evolves. Only the last 1000 responses are used to calculate the end-of-day index. Measured in real-time, the index changes as it moves around the global clock. Between 7 am and 12 am GMT, the Artprice member respondents are essentially European. However, towards the middle of the day (around 2 pm GMT), American opinions start to flood the index, particularly after the opening of Wall Street. As a result, this international indicator – with an intraday reading – reveals any divergences of opinion between Europeans, Americans and Asians.

In fact the theoretical foundation for the Artprice AMCI (R) index is essentially the same as that used to calculate the Michigan Consumer Sentiment Index of the Survey Research Center of the University of Michigan, a reference tool on all the world’s major financial markets. The AMCI (R) is based on 4 questions, two of which concern the current situation, and the other two which elicit forward-looking statements about market conditions in the next 3 months. This breakdown (into current and anticipated conditions) is particularly useful for revealing contrasting opinions.

Access to Art Market Confidence Index (R)

Over one week of observation, Artprice’s AMCI was animated by over 63,522 responses. Overall, it remained almost completely in the red, with an average of -6.51 points on a scale calibrated from -100 to +100.

Indeed, with a subprime crisis the depth of which seems difficult to predict, fears of a recession in the United States and a fairly significant stock market meltdown in January, art market players have seen their alert indicators turn red one by one. But sentiment is not the same on both sides of the Atlantic; in fact, the AMCI(R) has proved – for the first time ever in real-time – the very close correlation between the art market and stock markets. After just one week of operation, we note that the daily fluctuations of the AMCI(R) seem more stimulated by the Fed and the ECB that by record sales at Sotheby’s or Christie’s. For example on the morning of 31 January 2008, just after the Fed had announced a further 50 bp cut in its key rates (making a total cut of 2.25 points since September 2007) and following the ECB’s decision to maintain interest rates in order to avoid fanning inflation (which rose to 3.2% in January – a record since the creation of this statistic in 1997), the confidence of European art market buyers fell sharply. Artprice’s real-time Art Market Confidence Index plunged in unison with the contractions of the CAC40, the DAX and the Footsie. Immediately after 7am GMT, the AMCI(R) dropped to below its sliding daily average observed over previous days, receding from -7 points to -16 points by 11am GMT. Naturally, just a few hours later, the stimulus provided by the Fed’s decision was almost immediately reflected in US stock markets. Thus, by 5 pm GMT, after the opening of Wall Street, the AMCI(R) had recovered to -2.15 points, i.e. an improvement of +6.9% points in just a few hours.

The differential between US and European sentiment is particularly noticeable in responses to the second question used to calculate our AMCI(R): “Is your financial situation better or worse than three months ago?”. In France or in Germany, where the question of purchasing power currently has a high profile in the public arena and where the European Central Bank refuses to relax monetary policy for fear of fuelling inflation, the responses reflect current concerns. Artprice counted twice as many pessimists as optimists on this question. Several hours later, the American responses produced a substantially different picture with the pessimists scoring 19% less on average.

Alongside art market players’ views on their current wealth – which effectively correlate the AMCI(R) to daily stock market fluctuations – their anticipations regarding the foreseeable future also show a very clear trend. On average, 55.4% of market players questioned considers that the economic context will be unfavourable over the next three months. Only 13% anticipate a buoyant economic climate in the short term.

Over the next few days, following the announced slowdown of US economic growth (the annualised figure for Q4 2007 was 0.6% vs. 4.9% in Q3) and the negative job creations statistic in January 2008 (-17,000 new jobs vs. an anticipated figure of +75,000), the economic forecasts and leading indicators are likely to predict an increasingly sombre outlook.

This concern about the economic climate is the principal negative factor weighing on the Art Market Confidence Index(R) since 55% of those questioned remain confident that the context is still favourable for buying art. Indeed, the number of respondents who intend to buy art, despite the highly volatile stock market backdrop, reflects the widely held view that art represents an excellent economic safe haven. Nevertheless, while we can expect to see sustained demand for art over the coming months, prices in the market look set to fall. A majority of respondents anticipates a contraction in art market prices between now and the New York sales in May. In the meantime, this expectation may be validated by the evolution of the Artprice Global Index measured after the London sales orchestrated this week by Sothebys’ and Christie’s.

Source: (c) 1987-2007, Thierry Ehrmann

Artprice, the world leader in art market information, lists over 25 million auction prices and indices covering over 405,000 artists, continuously updated from 2,900 international auction houses. Artprice provides daily information on art market trends for the main financial press titles and agencies worldwide. Artprice Images(R) offers unlimited access to the largest database of art market information in the world, a library comprising 290,000 auction catalogues and reference works from 1700 to the present day. Artprice offers standardised adverts to its 1,300,000 members (member log in) and is the world’s leading market for buying and selling works of art (source: Artprice). Artprice is listed on Eurolist by Euronext Paris: Euroclear: 7478 – Bloomberg: PRC – Reuters: ARTF.

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