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Economic Sentiment rises further in both the euro area and the EU
According to data released on Friday by European Commission, in August the Economic Sentiment Indicator (ESI) increased sharply by 2.7 points in the euro area (to 95.2) and 3.1 points in the EU (to 98.1). The indicator rose for the fourth successive month in both regions, marking a two-year high in the EU.
August 2013: Economic Sentiment rises further in both the euro area and the EU
In August the Economic Sentiment Indicator (ESI) increased sharply by 2.7 points in the euro area (to 95.2) and 3.1 points in the EU (to 98.1). The indicator rose for the fourth successive month in both regions, marking a two-year high in the EU.
Euro area developments
In the euro area, the strong increase resulted from pronounced improvements in confidence among consumers and managers in industry, services and retail trade. Only in the construction sector confidence weakened. Economic sentiment improved in fourteen euro area countries and in all of its five largest economies, i.e. the Netherlands (+5.2), Germany (+3.3), Italy (+2.0), France (+1.6) and Spain (+0.8).
Industry confidence increased significantly (+2.7) fuelled by managers' much more positive assessment of the current level of overall order books and production expectations. Their assessment of the stocks of finished products improved too. Also companies' assessments of past production and the current level of export order books, which are not included in the confidence indicator, were much more favourable. Services confidence saw a significant increase as well (+2.5), resulting from a sharp rise in managers' assessment of the past business situation and important improvements concerning past demand and demand expectations.
Consumer confidence continued its upward trend that started in December 2012. Its marked improvement (+1.8) was mainly thanks to more optimistic views on the future general economic situation. Consumers' opinions on the future financial situation of their households and on their savings over the next 12 months also brightened, while their unemployment expectations remained unchanged. Also retail trade confidence increased substantially (+3.3).
Managers were particularly more confident about the future business situation. Also their assessments of the present business situation and their volume of stocks improved markedly. By contrast, the construction sector registered a decrease in confidence (-0.9), resulting from managers' worsened assessment of both order books and employment expectations. Financial services confidence (not included in the ESI) increased sharply by 3.5 points, driven by a striking increase in managers' demand expectations. While managers' assessment of past demand improved slightly, their views on the past business situation deteriorated somewhat.
Employment plans were revised upwards in industry, services and retail trade, while decreasing in construction. Selling price expectations remained broadly stable in industry, services and retail trade while increasing in construction. Consumers' price expectations for the next 12 months increased as well.
EU developments
In the wider EU, the improvement in sentiment was even slightly more pronounced than in the euro area (+3.1). On a sector basis, the increases in services, retail trade and consumer confidence were stronger than in the euro area and, in contrast to the euro area, construction confidence improved. On a country basis, the main reason for the sharper increase was markedly improving confidence in the largest non-euro area EU economy, the UK (+4.3).
The EU financial services confidence indicator improved at a lower pace than in the euro area (+1.6).
Employment plans in the EU were broadly in line with the euro area, except for construction where plans were revised upwards in line with the other sectors. While broadly stable in industry and retail trade as in the euro area, selling price expectations increased in the services sector.