Economic sentiment improved again at year-end. At 95.8, the EU Commission's gauge (ESI) rose 1.8 points versus November's upwardly revised reading to record its highest mark since last August. It was also well above the market consensus but, importantly, below its 100 long-run average for a sixth consecutive month.

At a sector level, gains in confidence were broad-based. Industry (minus 1.5 after minus 1.9) and construction (3.8 after 2.8) saw only a limited rise but there were more solid increases in services (6.3 after 3.1), retail trade (minus 3.6 after minus 6.6) and households (minus 22.2 after minus 23.9).

Regionally, the national ESI fell in France (93.3 after 94.6) but rose in Germany (94.6 after 92.6) and Spain (98.4 after 96.5). Italy (100.3 after 99.4) even moved back above the common 100 historical mean.

Meantime, inflation news was relatively favourable. Hence, expected selling prices in manufacturing (38.4 after 40.4) eased for a third straight month and also softened in services (28.3 after 29.8). Moreover, in line with November, household inflation expectations (23.7 after 29.9) fell quite sharply. Even so, all the gauges remained historically strong.

The December update is promising but still consistent with weakness in the real economy and high, if decelerating, inflation. There is nothing here to stop the ECB tightening again next month. Today's suite of data puts Eurozone's ECDI at 24 and the ECDI-P at 35, both measures indicating overall economic outperformance versus expectations.

After a long run of deterioration, economic sentiment finally improved in November, rising one full point to 93.7. December's expectations are for another improvement to 94.5.

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 Eurozone region. Data are available for each country and are aggregated for both the Eurozone 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.