Economic sentiment in the euro area softened slightly in December 2025, reinforcing signals of a cautious and uneven recovery. The economic sentiment indicator edged down to 96.7, while the employment expectations indicator fell more sharply to 96.8, leaving both measures below their long-term averages. This suggests that confidence remains fragile, particularly regarding labour market prospects.

Beneath the headline figures, sectoral dynamics diverged. Industry confidence improved modestly as production expectations and order books strengthened, alongside more positive views on export demand. In contrast, retail trade confidence weakened, reflecting softer assessments of past business conditions and elevated stock levels. Services and construction confidence were broadly unchanged, but construction firms reported rising constraints from insufficient demand, financial pressures, and material shortages, while labour shortages remained persistent.

For consumer confidence, households felt less pessimistic about their past finances but grew more concerned about future financial conditions and the broader economic outlook. Employment expectations deteriorated across services, retail, and construction, despite a moderate improvement in industrial hiring plans. At the same time, price perceptions and expectations rose further among consumers, underscoring lingering inflation sensitivity.

Overall, the data point to an economy characterised by tentative stabilisation, sectoral imbalances, and subdued confidence in future employment growth. These updates take the RPI to minus 39 and the RPI-P to minus 35, meaning that economic activities within the euro area continue to fall behind expectations.

Economic sentiment is expected flat to weaker at 96.9 for December from 97.0 in November.

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.