EMU: EC Economic Sentiment

Thu Oct 29 05:00:00 CDT 2015

Consensus Actual Previous Revised
Ec. Sentiment 105.2 105.9 105.6
Ind. Sentiment -2.5 -2.0 -2.2 -2.3
Cons. Sentiment -7.7 -7.7 -7.1

The EU Commission's new survey found another slight improvement in economic sentiment (ESI) this month. At 105.9, the headline measure was up 0.3 points versus its unrevised September reading and stronger than expected. The ESI has now risen for four consecutive months.

The latest increase was due to more optimistic morale in the goods producing sector (minus 2.0 after minus 2.3), construction (minus 20.7 after minus 23.2) and retail (6.5 after 4.2). However, it was not all positive as confidence in the consumer sector was confirmed down 0.6 points at minus 7.7, its weakest level since January, and services were off 0.5 points at 11.9. That said, apart from construction, all the sector indices were above their respective long-run averages.

For the larger states the national ESI rose in Italy (110.1 after 109.2) and France (102.6 after 101.0) but fell in Germany (107.0 after 107.7) and Spain (108.8 after 109.5). All remained on the right side of their common 100 historic norm.

Inflation news was mixed. On the bright side, expected selling prices were up in manufacturing (minus 2.4 after minus 3.3) and services (4.6 after 2.9), the latter seeing easily their highest print so far in 2015. However, consumer inflation expectations dropped quite sharply (0.7 after 3.2) to equal their weakest mark since March. This will not be wasted on the ECB.

Overall then, the October results are supportive of a slowly accelerating Eurozone economic recovery but only at a growth rate that remains too slow to prompt any meaningful domestically generated inflation pressures. Financial markets will still be very disappointed should the ECB not ease again in December.

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.