In April 2025, economic sentiment in the euro area took a hit, with the economic sentiment Indicator (ESI) falling to 93.6, 0.9 points below the consensus forecast and well below its long-term average. The decline was driven by sharp drops in consumer confidence and retail trade, while services also weakened. Consumers grew markedly more pessimistic about their financial situation and the broader economy, leading to reduced appetite for major purchases.

Industry and construction sentiment also fell, with lower production expectations offsetting better order book assessments. Employment outlooks remained unchanged (at 96.5), but underlying sectoral dynamics tell a nuanced story: optimism grew in industry, yet retail, services, and construction managers revised hiring plans downwards. Labour hoarding edged up, reflecting a cautious commitment to retain workers despite economic softening. Selling price expectations stayed high across sectors, but consumer price expectations for the year ahead rose steeply, pointing to persistent inflationary concerns.

Regional variation was notable: sentiment fell sharply in the France and Italy, while Germany and Spain showed slight improvement. In essence, the euro area economy remains under pressure, balancing weak demand with stubborn inflation expectations, as policymakers and firms navigate growing uncertainty. This latest update takes the RPI to minus 21 and the RPI-P to minus 25, meaning that economic activities are well behind market expectations of the euro area economy.

Economic sentiment expected at 94.5 for April versus 95.2 in the previous report.

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.