EMU: EC Economic Sentiment


Thu Sep 28 04:00:00 CDT 2017

Consensus Actual Previous Revised
Ec. Sentiment 112.2 113.0 111.9
Ind. Sentiment 5.1 6.6 5.1 5.0
Cons. Sentiment -1.2 -1.2 -1.5

Highlights
The EU Commission's measure of economic sentiment (ESI) saw its fourth increase in as many months in September. At 113.0, the end of quarter reading was up more than a full point versus its unrevised August mark, stronger than expected and at a new post-great Recession high.

Moreover, the latest headline gain reflected improved morale in all of the main sectors. Hence, industry recorded a 1.6 point rise to 6.6 while the consumer sector was up 0.3 points at minus 1.2 and services 0.2 points firmer at 15.3. Additionally, construction advanced 1.6 points to minus 1.7 and retail 1.4 points to 3.0. With the exception of retail, all of these sub-indices are at multi-year peaks. The broad-based increase is consistent with an economic recovery that is becoming both better balanced and increasingly self-sustaining.

All of the larger four member states posted rises in their respective national ESIs. France was up 0.4 points at 111.2, Germany 0.5 points at 112.4, Italy 1.8 points at 110.9 and Spain 0.6 points at 109.9.

There was also good news on inflation with a firming in both manufacturing and services expected selling prices as well as a significant increase in household inflation expectations. All either matched or registered new 2017 highs.

Today's survey results will do nothing to dent speculation about the ECB announcing some form of QE tapering at its next meeting on October 26th. If this report is anything to go by, the recovery in the real economy is nicely on track and inflation is edging in the right direction. The ECB should be quietly pleased.

Definition
Released by the European Commission, the economic sentiment index (ESI) provides a broad measure of both business and consumer sentiment. Results are available for all participating countries and aggregated to the Eurozone and European Union level. The survey is very detailed and offers information on demand, output and inflation.

Description
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.