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Euro area developments
The drop in euro-area sentiment was caused by weaker confidence in industry, services and, particularly, retail trade. Confidence in construction and among consumers held up well, moving essentially sideways. Amongst the largest euro-area economies, the ESI rose only in Spain (+1.9), while it booked losses in Germany (-1.3), the Netherlands (-1.3), France (-1.2) and Italy (-0.9).
Industry confidence posted the sharpest decline since March (-1.7), reflecting managers' worsened assessments of the stocks of finished products and, in particular, the current level of overall order books, which were mitigated only slightly by virtually unchanged production expectations. Of the questions not included in the confidence indicator, managers' assessments of past production and, more so, export order books clouded over. Services confidence eased (-1.1) due to a deterioration in all its components, i.e. managers' demand expectations, their appraisals of the past business situation and, in particular, of past demand. Bucking the trend, consumer confidence remained virtually unchanged (+0.2), as slightly increased concerns about the future general economic situation were offset by consumers' mildly improved savings expectations and views on their future financial situation. Unemployment expectations remained unchanged. Retail trade confidence saw a significant deterioration (-3.2), caused by managers' much grimmer views on the present and expected business situation; appraisals of the volume of stocks were broadly unchanged. Construction confidence remained virtually flat (-0.3), resulting from a combination of improved employment expectations and more cautious assessments of the level of order books. Finally, financial services confidence (not included in the ESI) improved on the back of brighter assessments of expected and, especially, past demand, which were only partly offset by more tepid assessments of the past business situation.
Employment plans improved in construction and, to a lesser extent, services, while they deteriorated in industry and retail trade. Selling price expectations firmed in retail trade, construction and, very mildly, in services, while they shrank in industry. Consumer price expectations continued the upward trend observed over the last five months.
EU developments
The marginally better development of the ESI in the EU (-0.8) can be attributed to virtually unchanged sentiment in the largest EU economy outside the euro area, the UK (+0.2), as well as comparatively moderate losses (-0.9) in the Polish indicator. From a sectoral perspective, the deterioration in industry, services and retail trade confidence was less pronounced in the EU, while sentiment in construction and among consumers remained broadly flat, in line with euro-area developments. As regards financial services confidence, the EU aggregate moved essentially sideways, rather than picking up.