EMU: EC Economic Sentiment

Thu Feb 26 04:00:00 CST 2015

Consensus Actual Previous Revised
Ec. Sentiment 101.9 102.1 101.2 101.4
Cons. Sentiment -6.7 -6.7 -8.5
Ind. Sentiment -4.6 -4.7 -5.0 -4.8

The EU Commission's economic sentiment index (ESI) rose 0.7 points from a slightly firmer revised January reading to 102.1 this month. The modest increase was a little stronger than expected and large enough for the index to match its highest level since May last year.

February's advance was mainly attributable to improving consumer confidence which, at minus 6.7, confirmed its flash estimate and gained nearly 2 points versus January. Morale in industry was just 0.1 points firmer at minus 4.7 while retail was 1.5 points better off at minus 2.1 and construction unchanged at minus 26.5.

Amongst the larger member states the national ESI slipped 0.5 points to 103.3 in Germany but rose 2 points to 98.4 in France and was up 1.4 points at 102.5 in Italy. Spain also saw a small improvement with a 0.8 point increase to 107.4.

Elsewhere the survey was cautiously more upbeat, notably and, for the ECB crucially, with regards to inflation expectations. Hence, the index for expected factory gate prices gained 0.4 points to minus 5.5 and its counterpart in services was up 2.4 points at 1.6. At least as importantly, consumer inflation expectations rose 1.3 points to minus 2.3, their first increase in four months.

Although still generally subdued, the February results provide further reason for supposing that the Eurozone economy was on the mend even before the ECB announced its QE package last month. Even so, today's findings still point to only moderate growth and it would not take much to unwind the limited progress made so far. Certainly there is nothing here to suggest that QE should not have been launched some while ago.

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.