27 September 2018

September 2018: Economic Sentiment decreases in both the euro area and the EU

Euro area developments

The decrease in euro-area sentiment resulted from lower confidence levels in the industry sector and among consumers, which were only partly offset by increases in the retail trade and construction sectors. Confidence in the services sector remained broadly stable. Amongst the largest euro-area economies, the ESI remained virtually unchanged in Germany (-0.2), Italy (-0.2) and the Netherlands (+0.1), while it decreased strongly in France (-1.7) and Spain (-1.5).

The decline in industry confidence (-0.9) resulted from a marked decrease in managers' production expectations and a smaller worsening of their assessment of the stocks of finished products, while managers' appraisal of the current level of overall order books improved slightly. Of the questions not included in the confidence indicator, managers' views on both export order books and past production improved somewhat. Broadly unchanged services confidence (+0.2) resulted from managers' lower assessment of past demand, which was offset by an improvement in their demand expectations; their assessment of the past business situation remained broadly unchanged. The decrease in consumer confidence (-1.0) reflected a broad-based deterioration in all its components (i.e. consumers' expectations on their future financial situation, the future unemployment, the future general economic situation, and their savings). The rise in retail trade confidence (+0.8) was driven by more positive views on the present business situation and the adequacy of the volume of stocks, while managers' assessment of the expected business situation remained virtually unchanged. The marked increase in construction confidence (+1.9) resulted from a substantial improvement in managers' assessment of the level of order books and a moderate increase in their employment expectations.

Finally, the marked decrease (-6.0) in financial services confidence (not included in the ESI) resulted from managers' markedly worse appraisals of all three components: past demand, past business situation and demand expectations. Employment plans saw a marked deterioration in services, while they went up in retail trade and construction. Employment expectations remained broadly stable in industry. Selling price expectations increased in industry, but decreased in services, retail trade and construction. Consumer price expectations picked up markedly in September. 

EU developments

The marginally worse outcome for the headline indicator for the EU (-0.9) resulted from a marked deterioration of sentiment in the two largest non-euro area EU economies, the UK (-1.6) and Poland (-1.2). Changes at sector level were qualitatively in line with those in the euro area, except for improving confidence in the services sector. As in the euro area, EU managers reported broadly unchanged employment expectations in industry and markedly lower expectations in services. Contrary to the euro area, employment expectations worsened also in the retail trade sector and remained broadly stable in construction. Price expectations were up across all business sectors in the EU. As in the euro area, EU consumers' prices expectations increased markedly as well.

Full press release

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