Economic sentiment improved in March, rising 0.8 points versus a marginally stronger revised February to 96.3. This was 0.5 points above the market consensus and a 3-month high but still nearly 4 points short of its long-run average.

The modest improvement reflected rising confidence in industry (minus 8.8 after minus 9.4), retail trade (minus 5.7 after minus 6.6) and in the consumer sector (minus 14.9 after minus 15.5). Confidence in construction (minus 5.6 after minus 5.5) was essentially unchanged.

Regionally, national sentiment improved in France (100.7 after 98.1), Germany (89.8 after 88.9) and Italy (100.9 after 99.4). Spain (102.0 after 102.4) posted a modest deterioration.

Inflationary expectations were mixed. Hence, in manufacturing expected selling prices rose from 3.9 to 5.6, an 11-month peak. However, by contrast, in the key services area they declined from 17.3 to 15.2, a 6-month low. Households (12.3 after 15.4) also fell, albeit to only a 2-month trough.

Today's update remains consistent with, at best, only sluggish growth of Eurozone real GDP this quarter. Still, taken together with the varied picture of inflation, the ECB is unlikely to feel any more pressured to deliver a cut in interest rates at its next meeting in April. That said, the March data lift the region's RPI to 10 and the RPI-P to 12. As such, at least the softness of activity in general is no more than forecasters currently anticipate.

Economic sentiment in March is expected to rise slightly to 95.8 from February's 95.4 which remained well short of the 100 long-run average.

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.