EMU: EC Economic Sentiment

Fri Apr 27 04:00:00 CDT 2018

Consensus Actual Previous Revised
Ec. Sentiment 112.0 112.7 112.6 112.7
Ind. Sentiment 5.8 7.1 6.4 7.0
Cons. Sentiment 0.4 0.4 0.1

The EU Commission's measure of economic sentiment was unchanged and slightly stronger than expected this month. At 112.7, April's reading matched March's minimally upwardly revised print and so ended a run of three consecutive declines. Even so, the latest outturn was still some 2.6 points short of its recent high in January.

The stability of April's headline masked minor improvements in morale in industry (7.1 after 7.0) and households (0.4 after 0.1). Gains here were offset by weaker confidence in services (14.9 after 15.9), retail (minus 0.6 after 0.7) and construction (4.5 after 5.2).

Regionally amongst the larger four member states the national ESI rose in France (110.3 after 109.2) and Spain (110.6 after 109.0) but was only flat in Germany (112.2) and fell in Italy (109.4 after 109.8).

Meantime, inflation developments were mixed. The ECB will be pleased to see a rise in service provider's expected selling prices (9.0 after 8.4) although even this failed to fully offset March's decline. However, it will be less impressed with unchanged household inflation expectations (16.1) and not happy with a fourth consecutive drop in manufacturers' expected charges. Indeed, for manufacturers, price expectations are now at their weakest level since last October.

Today's report provides further evidence of a marked slowdown in economic activity in the Eurozone. On the positive side, there are at least tentative signs that growth is stabilising a view supported by the flash April PMIs - but potentially at a level that may raise fresh doubts about attaining the ECB's price stability goals. At yesterday's post-meeting press conference, President Draghi indicated that the central bank was not especially worried by the slowdown. Even so, upcoming data will need watching especially closely for more of the same could well force the central bank to extend its asset purchase programme beyond September.

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.