30 July 2018

July 2018: Economic Sentiment broadly stable in the euro area and the EU

Euro area developments

Broadly unchanged euro-area sentiment resulted from decreases in industry and retail trade confidence, which were offset by an increase in the services sector. Confidence in construction remained broadly stable while it stayed unchanged among consumers. Amongst the largest euro-area economies, the ESI rose only in Germany (+0.9), while it dropped in Spain (−1.7) and decreased slightly in Italy (−0.6). The ESI remained virtually stable in France (−0.1) and unchanged in the Netherlands (0.0).

The marked decrease in industry confidence (−1.1) resulted from managers' more pessimistic views on all three components, i.e. production expectations, the current level of overall order books and - to a lesser extent – the stocks of finished products. Of the questions not included in the confidence indicator, managers' assessment of past production improved while their views on export order books worsened. Increasing services confidence (+0.9) was fuelled by managers' significantly brighter demand expectations, while their assessments of past demand declined slightly and their views on the past business situation remained broadly unchanged. Stable consumer confidence (0.0) reflected virtually unchanged assessments of the future general economic situation and of households' future financial situation, while consumers' brighter savings expectations were offset by more negative views on future unemployment. The decline in retail trade confidence (−0.8) resulted from more negative views on the expected business situation and, in particular, the adequacy of the volume of stocks; meanwhile, manager's assessment of the present business situation edged up. Virtually flat developments in construction confidence (−0.2) resulted from downward revisions in managers' employment expectations, which were offset by their improving assessment of the level of order books. Finally, financial services confidence (not included in the ESI) held broadly stable (+0.2) as a result of improved appraisals of past demand and of the past business situation, which were offset by the worsening of managers' demand expectations.

Employment plans saw a significant downward revision in industry and construction and a smaller decrease in services, while employment plans improved markedly in the retail trade sector. Selling price expectations remained virtually stable in services, construction and retail trade, while they decreased slightly in industry. Consumer price expectations edged up in July.

EU developments

The marginally better outcome of the headline indicator for the EU (+0.1) was mainly due to the marked improvement of sentiment in the largest non-euro area EU economy, the UK (+1.6), while the ESI remained broadly unchanged in Poland (+0.3). While services confidence improved in line with the euro area, confidence among consumers also improved in the EU. In line with the euro area, EU confidence declined in industry, retail trade and, in contrast to the euro area, construction. Further in contrast with euro-area developments, EU confidence increased markedly in the financial services sector.

In line with the euro area, EU managers in industry and construction reported a strong downward revision in their employment expectations, while – as opposed to the euro area – the latter also decreased markedly in retail trade and remained almost unchanged in services. Further in contrast to the euro area, price expectations increased markedly in retail trade, remained stable in industry, decreased in services and fell in construction.

Full press release

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