EMU: EC Economic Sentiment

Wed Nov 29 04:00:00 CST 2017

Consensus Actual Previous Revised
Ec. Sentiment 114.5 114.6 114.0 114.1
Ind. Sentiment 8.7 8.2 7.9 8.0
Cons. Sentiment 0.1 0.1 -1.0 -1.1

The EU Commission's measure of economic sentiment (ESI) rose for a sixth consecutive month in November. At 114.6, the headline indicator was 0.5 points above its marginally firmer revised October reading, slightly stronger than expected and at its highest level since October 2000.

The latest gain reflected improved morale in most sectors. Hence, confidence was up 0.2 points at a new record of 8.2 in industry and 1.2 points higher at 0.1 in the consumer sector. Construction (1.6 after 0.4) also made ground as, to a lesser extent, did services (16.3 after 16.2). This left just retail (4.2 after 5.5) to register a decline although even here the fall only reversed around a half of October's 2.5 point bounce.

Regionally, it was a generally good performance by the four larger member states. The national ESI rose nearly 2 full points to 112.0 in France, and was up 0.6 points at 110.8 in Spain. Italy (up 0.2 points at 112.1) also made ground but Germany (114.4 after 114.5) edged a little softer.

Meantime, inflation developments were largely positive. In particular, selling price expectations in manufacturing jumped 2.4 points to a new post-Great Recession peak of 11.1 and so easily more than reversed October's 1.8 point decrease. Household inflation expectations rose 1.3 points to 16.0, their third consecutive advance and a multi-year high. Services disappointed with a 0.4 point drop to 8.2 but this still constituted their second highest reading so far in 2017.

Overall the ECB should be quietly pleased with today's findings. The headline index is consistent with the bullish picture of economic activity painted by the flash PMIs and, in the main, inflation expectations continue to move in the right direction. December's ECB meeting should see more than a few smiling faces around the Council table.

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.