EMU: EC Economic Sentiment

Thu May 28 04:00:00 CDT 2015

Consensus Actual Previous Revised
Ec. Sentiment 103.7 103.8 103.7 103.8
Ind. Sentiment -3.0 -3.0 -3.2
Cons. Sentiment -5.5 -5.5 -4.6

Overall economic sentiment was in line with expectations according to the latest EU Commission survey. At 103.8, the May reading matched the marginally upwardly revised April print and effectively means that morale has moved sideways since February.

Amongst the major categories, confidence in industry was up a couple of ticks at minus 3.0 but 0.9 points weaker at minus 5.5 in the consumer sector (as per the flash estimate). Services were 0.8 points better off at 7.8, retail 2.2 points higher at 1.4 and construction 0.5 points firmer at minus 25.0.

Regionally amongst the larger member states, France (0.7 points) and Germany (0.5 points) saw a modest improvement in economic sentiment while Spain was unchanged and Italy posted a small decline (0.4 points).

Inflation developments were generally positive. Hence, manufacturers' expected selling prices rose for a fourth consecutive month and their service sector equivalent recorded their highest reading so far this year. There was also a solid rise in consumer inflation expectations which saw their strongest mark since last November.

May's results are consistent with continued economic growth this quarter but offer little reason for expecting any significant pick-up in momentum. Inflation expectations at least look to be moving in the right direction but overall the impression is still one of a disappointingly sluggish economic recovery that maintains pressure on QE to deliver.

Market Consensus Before Announcement

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.