EMU: EC Economic Sentiment

Mon Mar 30 04:00:00 CDT 2015

Consensus Actual Previous Revised
Ec. Sentiment 103.0 103.9 102.1 102.3
Ind. Sentiment -4.1 -2.9 -4.7 -4.6
Cons. Sentiment -3.7 -3.7 -6.7

The EU Commission's measure of economic sentiment (ESI) advanced a further 1.6 points versus a slightly firmer revised February reading to 103.9 in March, its fourth (and sharpest) increase in a row and its highest level since July 2011. The outcome was slightly stronger than expected.

The latest improvement came on the back of broad-based gains amongst the key sectors. Hence, morale in industry was up 1.8 points at minus 2.9 and rose 3 points to minus 3.7 in the consumer sector, as per its flash estimate. Services saw a 0.7 point increase to 6.0, retail a 0.6 point advance to minus 0.7 and construction a 0.9 point rise to minus 24.2. Morale is above its long-run average in industry, retail and the consumer sector but still below in services and construction.

Inflation news should be cautiously well received by the ECB. Thus, household inflation expectations gained 1.5 points to minus 0.8, their second increase in a row, and expected selling prices also firmed in manufacturing (2.4 after 2.0) and services (minus 4.4 after minus 5.8).

National ESIs made progress in all of the four larger member states. France saw a modest 0.4 point increase to 98.5 but Germany was up 1.8 points at 105.1, Italy 2.4 points at 106.1 and Spain 1.7 points at 109.1. Accordingly France was, once again, the only country in this group still below the common 100 long-term mean.

The March results are consistent with some pick-up in Eurozone economic momentum through the first quarter. However, the monetary authorities will probably be even happier with the apparent turnaround in inflation expectations. Without this the chances of HICP inflation getting anywhere close to its near-2 percent medium term target would be remote.

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.