Economic Sentiment declines moderately in both the EU and the euro area

Published on Friday, 06 January 2012 16:20
Posted by Scott Buckler

In December, the Economic Sentiment Indicator (ESI) declined somewhat, by 0.8 points in the EU and by 0.5 points in the euro area, to 92.0 and 93.3, respectively

The overall decline in the EU resulted from weakening confidence in services, construction and among consumers, while sentiment improved in retail trade and remained broadly stable in industry. In the euro area, a worsening of sentiment was observed in services, retail trade and among consumers, while confidence in industry and construction was broadly unchanged.

Among the largest Member States, Poland (-5.0) reported the biggest decrease in sentiment, followed by Italy (-4.6), Spain (-1.3) and, to a lesser extent, the UK (-0.5). Sentiment was broadly unchanged in France (+0.1), while it improved in the Netherlands (+0.8) and Germany (+1.0). The ESI is above its long-term average only in Germany.Confidence in industry was broadly stable in both the EU and the euro area, remaining just below its long-term average in both regions.

A more pessimistic assessment of companies' order books and a marginal worsening of their stocks of finished products evaluation were offset by a marked improvement in managers' production expectations. In addition, for the first time since April 2011, managers gave a more optimistic assessment of their export order books. Employment expectations deteriorated in industry in both the EU and the euro area, while managers' selling price expectations increased slightly in the EU and remained broadly unchanged in the euro area.

Sentiment in services decreased in both the EU (-1.2) and the euro area (-0.5), mainly due to gloomier assessments of the past business situation and past demand, while managers in the euro area became somewhat more optimistic about expected demand. Sentiment in the retail trade sector increased the EU (+2.7) and declined in the euro area (-0.6), the latter owing mainly to a deterioration of managers' business expectations. Sentiment in construction decreased in the EU (-1.5), while it remained broadly unchanged in the euro area (-0.2).

Confidence among consumers deteriorated by 1.2 points in the EU and by 0.7 points in the euro area, mainly on the back of growing concerns about their expected financial situation and savings. Consumers were also more pessimistic about future unemployment developments. However, the overall consumers' readings mask different developments across Member States.

Confidence in financial services – not included in the ESI – fell in both the EU (-2.5) and in the euro area (-4.9), because of managers' worsening assessment of recent developments in the business situation and demand. By contrast, managers were more optimistic about expected demand for their companies' services.


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