13 September 2017

August 2017: Economic Sentiment continues to rise in the euro area, broadly stable in the EU

The Economic Sentiment Indicator (ESI) for the euro area rose again in August, increasing slightly by 0.6 points to 111.9, its highest level in more than 10 years. The indicator for the EU remained broadly stable (-0.3 points to 111.9), just below its 10-year high of July.

Euro area developments

The increase of the ESI in the euro area resulted from improved confidence in industry and services, partly offset by marked decreases registered in the retail trade and construction sectors, while confidence among consumers remained broadly unchanged. The ESI increased in three of the five largest euro-area economies, namely in Italy (+3.6), France (+1.7) and Spain (+1.4), while it eased in Germany (-0.6) and the Netherlands (-0.9). The increase in industry confidence (+0.6) was triggered by a marked increase in managers' production expectations and a slight improvement in their assessment of the stocks of finished products. By contrast, managers' appraisal of the current level of overall order books worsened slightly. Of the questions not included in the indicator, managers' assessments of past production improved, while their appraisal of export order books worsened. Higher services confidence (+0.7) resulted from managers' more positive assessment of the past business situation and higher demand expectations, while their assessment of past demand remained virtually unchanged. Consumer confidence remained broadly stable (+0.2), reflecting households' more optimistic views on their future financial situation and savings expectations, which were largely offset by more pessimistic assessments of the future general economic situation and future unemployment. Retail trade confidence plunged (-2.3) due to managers' more negative views on all three components of the indicator (i.e. the assessments of the present and expected business situation and of the adequacy of the volume of stocks). Also the construction confidence indicator decreased distinctly (-1.5), due to markedly lower employment expectations and worsened assessments of the level of order books. Finally, the sharp rise (+8.5) in financial services confidence (not included in the ESI) owes to strongly improved appraisals of all three components (i.e. past business situation and past and expected demand). Employment plans saw upward revisions in industry, while they shrank in services and construction and remained broadly unchanged in retail trade. Selling price expectations increased in industry, while they remained broadly stable in services and decreased slightly in retail trade and strongly in construction. Consumers' price expectations remained virtually unchanged.

EU developments

The slight downward correction of the ESI in the EU (-0.3) was mainly due to worsening sentiment in the largest non-euro area EU economy, the UK (-3.6); sentiment in Poland remained broadly unchanged (-0.2). EU developments at sectoral levels were broadly in line with those for the euro area, the main difference being that industry confidence remained broadly stable rather than improving as in the euro area. Managers' employment expectations were broadly in line with euro area developments in industry (up) and construction (markedly down), while, contrary to the euro area, employment was expected to remain stable in services and shrink strongly in retail trade. Price expectations were up both in industry and services. 

Full press release

© European Commission