EMU: EC Economic Sentiment

January 30, 2017 04:00 CST

Consensus Actual Previous Revised
Ec. Sentiment 107.8 108.2 107.8
Ind. Sentiment 0.2 0.8 0.1 0.0
Cons. Sentiment -4.9 -4.7 -5.1

The EU Commission's gauge of economic sentiment (ESI) rose for a fifth consecutive month in January. At 108.2, the headline index was 0.4 points above its unrevised December reading, stronger than market expectations and at its highest level in almost six years.

The latest modest improvement reflected small gains in industrial morale (0.8 after 0.0) and consumer confidence where the flash estimate was revised up a couple to ticks to minus 4.7, its best print since April 2015. Services (13.5 after 13.1) also made headway but there were losses in retail (2.4 after 3.5) and construction (minus 12.8 after minus 12.1).

Amongst the big four economies, the news was mixed with gentle falls in the national ESI in France (104.9 after 105.5) and Germany (109.1 after 109.4) contrasting with small rises in Italy (105.6 after 104.3) and Spain (107.4 after 106.0). However, all remained comfortably above the common 100 long-run average.

More promisingly, there was universally good news on prices. Hence, selling price expectations were up significantly in both manufacturing (8.3 after 5.4) and services (6.9 after 4.9). At the same time, household inflation expectations (14.5 after 8.7) recorded their steepest gain in a nearly decade and now stand at their highest mark since January 2014.

All in all, the ECB should be more than a little happy with today's findings. Taken at face value, not only is the Eurozone real economy picking up speed but inflation also seems to be moving in the right direction. Policy looks increasingly well set for 2017.

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.

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.