In August 2019, the Economic Sentiment Indicator (ESI) increased slightly in the euro area (by 0.4 points to 103.1), while it continued to decline in the EU (by 0.6 points to 101.4).
Euro area developments
The slight improvement of euro-area sentiment resulted from markedly higher confidence in industry and retail trade, while confidence deteriorated significantly in services and construction and, to a lesser extent, among consumers. Amongst the largest euro-area economies, the ESI rose strongly in Spain (+1.9) and edged up in Germany (+0.4), while it remained broadly stable in France (+0.1) and the Netherlands (+0.2) and decreased only in Italy (−0.9).
The strong increase in industry confidence (+1.4), partially offsetting the significant decline observed in July, resulted from managers' more optimistic views on all three components, i.e. production expectations, the current level of overall order books and the stocks of finished products. Managers' assessments of the past production and export order books – which are not included in the confidence indicator – rebounded significantly, too. The marked decline in services confidence (−1.3) was driven by managers' more pessimistic views on the past business situation and past demand, as well as their demand expectations. The slight decline in consumer confidence (−0.5) reflected the deterioration in households’ expectations about the general economic situation, while their assessments of both their past and future financial situation improved somewhat, and their intentions to make major purchases remained unchanged. The strong increase in retail trade confidence (+1.2) was fuelled by more optimistic views on the present business situation and, to a lesser extent, the adequacy of the volume of stocks, while expectations about the business situation worsened. Lower construction confidence (−1.3) resulted from managers' lower employment expectations, as well as their more pessimistic assessment of the level of order books. Finally, financial services confidence (not included in the ESI) decreased markedly (−4.8), reflecting strong deterioration in managers' assessment of the past business situation and past demand, while their demand expectations remained virtually unchanged.
Employment plans saw a significant improvement in industry, while they worsened in services, retail trade and construction. Selling price expectations increased slightly in industry and construction, while they decreased in retail trade and remained virtually stable in services. Also consumer price expectations stayed broadly unchanged in August.
The slight decline of the ESI in the EU (−0.6) was mainly due to the strong deterioration of sentiment in the largest non-euro area EU economy, the UK (−1.8); sentiment remained unchanged in Poland (0.0). While industry confidence improved markedly in line with the euro area, the deterioration of EU confidence in services and among consumers was more marked than in the euro area. In contrast with euro-area developments, EU confidence in retail trade declined strongly, while sentiment in construction stayed unchanged. As regards financial services confidence, the drop in the EU aggregate was in line with euro-area developments.
Managers' employment expectations worsened in line with those for the euro area for services and retail trade. EU employment expectations also weakened in industry, but remained broadly unchanged in construction. Further in contrast to the euro area, EU price expectations declined markedly in industry and retail trade, while they edged down in services and increased sharply in construction.
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