In November, the Economic Sentiment Indicator (ESI) remained broadly stable in the euro area ticking upward from a revised 95.7 to 95.8. This update is 0.2 percentage points above the market consensus and 0.2 percentage points below its long-run average of 100.

At a sector level, confidence slightly rose in the industry (minus 11.1 after minus 12.6) and retail (minus 4.4 after minus 7.2). However, it remained bleak in the household sector (minus 13.7 after minus 12.5), while services slightly fell (from 6.8 in October to 5.3 in the current month). Additionally, construction (minus 4.8 after minus 4.8) remained unchanged from the previous month.

Regionally, national sentiment strengthened significantly in France (96.9 after 93.9) and Spain (102.1 after 100), while it weakened in Italy (99.2 after 99.5) and Germany (88.8 after 90.1). Nevertheless, only Spain among the larger four economy groups is above the common 100 historic mean.

Inflation expectations rose. Hence, expected selling prices were up slightly in manufacturing (7.5 after 6.7) but fell for services (12.7 after 13.9). In addition, inflation expectations in the consumer sector (17.7 after 13.5) also increased, hitting their highest mark since March.

The report suggests that the ECB may face continued challenges in balancing monetary tightening to address rising inflation expectations against supporting weak economic growth, as sentiment remains below historical averages and uneven across sectors and regions in the Euro Area. The latest update nudges up the Eurozone RPI to minus 27 and the RPI-P to minus 37 but leaves economic activity in general running well behind market expectations.

Forecasters expect economic sentiment flat at 95.6 in November from October. Industry sentiment is expected down to minus 13.5 from minus 13.0 in October and consumer confidence 1.2 points lower at minus 13.7.

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.