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Euro area developments
The improvement of euro-area sentiment resulted from higher confidence in industry and, to a lesser extent, in services and among consumers, while confidence remained virtually flat in retail trade and cooled down significantly in construction. Amongst the largest euro-area economies, the ESI increased sharply in France (+4.0), markedly also in Italy (+1.7) and Spain (+1.3) and mildly in Germany (+0.4). Sentiment eased only in the Netherlands (-1.3).
Industry confidence booked the first solid improvement (+1.4) in thirteen months, thanks to the sharpest increase in managers’ production expectations in 6 ½ years, as well as more favourable assessments of the stocks of finished products. The current level of overall order books, on the other hand, was assessed more negatively. The positive development of the confidence indicator contrasted with managers’ assessments of past production and export order books (not included in the confidence indicator) which deteriorated significantly and, in the case of export order books, by the highest margin in 6 ½ years. Services confidence improved slightly (+0.4), reflecting somewhat better assessments of past and expected demand, while managers’ views on the past business situation remained virtually unchanged. Consumer confidence firmed (+0.8), propelled by households’ brighter expectations about the general economic situation, as well as more upbeat views on their past and future financial situation, which, however, failed to significantly alter their intentions to make major purchases. Retail trade confidence was broadly stable (-0.1), as improved appraisals of the present business situation were counterbalanced by lower assessments of the expected business situation and the adequacy of the volume of stocks. Construction confidence took the strongest hit in some three years (-2.4), as managers’ assessments of the level of order books and, particularly, their employment expectations clouded over. Finally, financial services confidence (not included in the ESI) increased (+2.9) on the back of more positive views on past demand and the past business situation, which were only partially outweighed by grimmer demand expectations.
Employment plans deteriorated in industry, services and, particularly, construction, while they remained unchanged in retail trade. Selling price expectations eased in services, retail trade and construction, while they were broadly flat in industry. Consumer price expectations, by contrast, increased.
EU developments
The significantly more muted development of the ESI in the EU (+0.2) was mostly due to a strong deterioration in the largest non-euro area EU economy, the UK (-4.8). Sentiment in Poland was flat (0.0). From a sectoral perspective, EU developments differed significantly from the euro area in so far as industry and construction confidence remained broadly flat and services confidence slipped. Decreasing employment expectations and increasing selling price expectations in retail trade, as well as flat selling price expectations in construction constituted the only other major divergences from the euro area.