28 June 2018

June 2018: Economic Sentiment broadly stable in the euro area, slightly down in the EU

In June, the Economic Sentiment Indicator (ESI) remained virtually unchanged in the euro area for the third consecutive month, registering a marginal decrease of 0.2 points (to 112.3). In the EU the indicator edged down by 0.6 points (to 112.2).

Euro area developments

Broadly unchanged euro-area sentiment resulted from stable or incrementally higher confidence in industry, services and retail trade compensating for lower consumer and construction confidence. Amongst the largest euro-area economies, the ESI rose noticeably in Italy (+1.2) and France (+1.0), while it decreased in Germany (−0.8) and, more markedly so, in the Netherlands (−1.8). The ESI remained stable in Spain (+0.0).

Unchanged industry confidence (+0.0) resulted from managers' brighter production expectations being offset by more pessimistic views on the current level of overall order books; managers' assessments of the stocks of finished products remained stable. Of the questions not included in the confidence indicator, managers' assessment of past production remained broadly unchanged while their views on export order books deteriorated markedly. Stable services confidence (+0.0) resulted from managers' unchanged assessment of the past business situation, while their brighter views on past demand were offset by the deterioration of their demand expectations. The decrease in consumer confidence (−0.7) reflected more negative assessments of the future general economic situation, future unemployment and, in particular, consumers' savings expectations; only the views on households' future financial situation remained broadly stable. Virtually flat developments in retail trade confidence (+0.1) resulted from more positive views on the expected business situation, which were partly offset by the worsening of managers' assessment of the past business situation; their views on the adequacy of the volume of stocks remained virtually unchanged. The drop in construction confidence (−1.5) resulted from downward revisions of both managers' employment expectations and their assessment of the level of order books. Finally, the rise (+1.6) in financial services confidence (not included in the ESI) resulted from improved appraisals of past and expected demand, which were only partly offset by a deterioration in managers' assessment of the past business situation.

Employment plans saw a significant upward revision in industry and a slight increase in retail trade, while employment plans worsened in services and construction. Selling price expectations increased in industry and remained virtually unchanged in services, while they decreased slightly in retail trade and, more importantly so, in construction. Consumer price expectations were flat in June.

EU developments

The decrease of the headline indicator for the EU (−0.6) was mainly due to the slight deterioration of sentiment in the largest non-euro area EU economy, the UK (−0.5), while the ESI remained unchanged in Poland (+0.0). In line with the euro area, industry confidence remained broadly unchanged while confidence worsened in construction and among consumers. In contrast to the euro area, EU confidence decreased in services and increased markedly in retail trade. As in the euro area, EU confidence rose markedly in the financial services sector.

Managers' employment plans were somewhat more upbeat in the EU than in the euro area, with expectations coming in broadly flat in services and higher in industry and retail trade while decreasing only in construction. Price expectations were broadly in line with those for the euro area for the services, retail trade and construction sectors; in contrast to the euro area, selling prices in the EU are expected to remain virtually unchanged in industry.

Full press release

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