EMU: EC Economic Sentiment

Wed May 30 04:00:00 CDT 2018

Consensus Actual Previous Revised
Ec. Sentiment 112.1 112.5 112.7
Ind. Sentiment 6.8 6.8 7.1 7.3
Cons. Sentiment 0.2 0.2 0.4 0.3

The EU Commission's yardstick of economic sentiment (ESI) was little changed in May. At 112.5, the ESI was just 0.2 points short of its unrevised April reading and slightly stronger than market expectations. Even so, this was its fifth fall in as many months and the weakest outturn since August 2017.

The lack of any real volatility in the headline measure reflected small falls in morale in industry (6.8 after 7.3), households (0.2 after 0.3) and services (14.3 after 14.7) that together more than offset larger gains in retail (0.7 after minus 0.7) and construction (7.0 after 4.6). All sub-indices were well above their respective long-run averages.

Amongst the larger four member states, the national ESI fell in France (108.4 after 110.2), Italy (108.4 after 109.4) and Spain (109.4 after 110.6) but edged marginally firmer in Germany (112.7 after 112.6). Accordingly, the regional index would have been weaker but for the outperformance of the smaller countries.

Inflation signals were mixed. Hence, expected selling prices in manufacturing (9.3 after 9.9) saw their fifth straight decline but services (9.1 after 9.0) were essentially flat (9.1 after 9.0) and household inflation expectations (17.5 after 16.1) posted their first increase since January.

Overall the May ESI results are in keeping with no significant pick-up in Eurozone growth this quarter while inflation expectations in the aggregate remain broadly stable. There is little here to strengthen the case for ending the QE programme in 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.