According to the EU Commission's latest survey economic sentiment in the Eurozone this month was unchanged from October's upwardly revised 106.1 and so matched its highest level since May 2011.
However, stability in the headline reading masked divergent developments amongst the sectors where an unexpectedly large fall in industrial confidence (minus 3.2 from minus 2.0) contrasted with a surprise bounce in consumer morale (minus 5.9 from a revised minus 7.5). Sentiment in services (12.8 after 12.3) and in construction (minus 17.8 after minus 20.7) also made fresh ground but retail (5.8 after 6.4) reversed some of October's 2.2 point rise.
Regionally amongst the larger EMU countries the national ESI was up in just Spain (109.0 after 108.8) but falls elsewhere were relatively small with France down 0.6 points at 102.8, Germany off just 0.1 point at 106.9 and Italy 0.7 points weaker at 109.1.
Inflation news was a little more upbeat. Although expected selling prices were slightly weaker in service (4.1 after 4.8), they rose in manufacturing (minus 0.7 from minus 2.3). Moreover, there was a useful bounce in consumer inflation expectations (3.7 after 0.5) which saw their highest level since July.
Overall today's results should sit cautiously well with the ECB. The Eurozone ESI is struggling to make a clear break higher it has risen only 2.1 points since March but the trend is moving in the right direction. At least as importantly, it looks as if inflation expectations in general have bottomed and in some sectors appear to be creeping higher. None of this is very likely to prevent the ECB from easing again next week but more of the same could yet see the region's economy surprise on the upside over coming quarters.
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.