EMU: EC Economic Sentiment

Thu Jan 08 04:00:00 CST 2015

Consensus Actual Previous Revised
Ec. Sentiment 101.2 100.7 100.8 100.7
Ind. Sentiment -4 -5.2 -4.3
Cons. Sentiment -10.9 -10.9 -11.6

The EU Commission's measure of economic sentiment (ESI) was unchanged in December at November's marginally weaker revised mark of 100.7. The outcome, which also matched October's reading, was on the soft side of expectations.

Stability in the headline index masked a renewed deterioration in industrial confidence which slipped 0.9 points to minus 5.2 and an improvement in consumer morale which was up 0.6 points at minus 10.9 as already signalled in its flash estimate. Elsewhere, sentiment in services gained 1.2 points to 5.6 and was up 0.7 points at minus 5.3 in retail and 0.8 points higher at minus 25.5 in construction.

Amongst the larger economies the national ESI rose in Italy (1.3 points to 97.5) and Spain (1.4 points to 105.6) but only held steady in Germany 103.7) and, ominously, fell in France (1.6 points to 96.1). Accordingly, both France and Italy remain below the 100 long-run average.

Meanwhile, and of particular relevance ahead of the ECB's first policy meeting of the year in two weeks' time, household inflation expectations resumed their downward trend. At 2.7 the survey's gauge was fully 3 points below its November reading, its steepest fall of 2014. The central bank will not be happy.

The average fourth quarter Eurozone ESI stands at 100.7, a couple of ticks short of its third quarter mean and so most likely indicative of another period of disappointingly sluggish growth. Combined with further evidence that inflation expectations are no longer anchored, today's results add to pressure on the ECB to give the nod to QE later this month.

Conducted by the European Commission, the index is a broad measure of both business and consumer sentiment.

The survey offers key sentiment data across the European Union and the European Monetary Union. Data are available for each country and are aggregated for both the EMU and EU. It is conducted by the European Commission rather than Eurostat, the compiler of most other EMU data. The index is a broad measure of both business and consumer sentiment in the EU members. Because of its coverage of all the EU countries it is highly regarded in the financial markets as a good indicator of the mood of consumers and industry in each country. It is also normally a good indicator of quarterly GDP.

Confidence indicators are calculated for industry, services, construction, retail trade and consumers. In turn, they are combined into an overall composite number, the economic sentiment indicator (ESI). The data are seasonally adjusted and defined as the difference (in percentage points of total answers) between positive and negative answers. The survey also covers other areas of the economy that are not explicitly included in the ESI. In particular, responses to questions about the inflation outlook are used by the ECB as one means of measuring inflationary expectations.