EMU: EC Consumer Confidence Flash

Highlights

Euro area consumer confidence extended its recovery in June, with the confidence indicator showing a 1.3-point improvement from May at minus 17.7. The gradual rise suggests that households are becoming less pessimistic as easing inflationary pressures, stabilising labour markets, and improving financial conditions begin to support sentiment. However, at minus 17.7, the indicator remains significantly below its long-term average, indicating that consumers are still cautious about their financial outlook and the broader economic environment.

The persistent gap from historical norms implies that the recovery in confidence is fragile rather than broad-based. Households are likely to remain selective in their spending, favouring essential goods over discretionary purchases while maintaining higher precautionary savings. This restrained behaviour could limit the strength of private consumption, which is a key driver of euro area economic growth.

While the improving trend reduces concerns of a further deterioration in demand, the subdued absolute level of confidence suggests that economic momentum remains vulnerable to geopolitical risks, energy price volatility, and labour market uncertainty. Consequently, the euro area economy appears to be moving towards gradual stabilisation rather than a robust consumer-led expansion, reinforcing expectations of a measured and data-dependent policy environment. These latest updates take the RPI to minus 12 and the RPI-P to minus 16, meaning that economic activities are now behind market expectations in the euro zone.

Market Consensus Before Announcement

Sentiment expected higher at minus 17.5 for June compared with minus 19.0 in May.

Definition

Compiled by the European Commission, the flash consumer confidence index is a broad measure of consumer sentiment. It is based on monthly surveys of consumers from all the European Union countries. The survey probes into consumers' perceptions towards their past and expected future financial conditions, as well as their feel of the economy overall. This includes topics such as major purchase intentions for the next year, savings intentions, home improvements, purchase of a car, prices and unemployment, among others. This flash measure is based on only partial data and provides an early guide to the final index, published around a week later as part of the full Economic Sentiment survey.

Description

The pattern in consumer attitudes can be a major influence on stock and bond markets. Consumer spending drives the lion’s share of the economy, and if the consumer is not confident, she will not be willing to pull out the big bucks. This Consumer Confidence survey offers key confidence data across the European Union and the European Monetary Union. Consumer confidence impacts consumer spending which affects economic growth. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Since consumer spending accounts for such a large portion of the economy, the markets are always eager to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. The index is a broad measure of consumer confidence in the EU members and 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 in each country. It is also normally a good indicator of quarterly GDP.

Data are available for each country and are aggregated for both the EMU and EU. The data are seasonally adjusted and defined as the difference (in percentage points of total answers) between positive and negative answers. The survey is conducted by the European Commission rather than Eurostat, the compiler of most other EMU data and measures consumer confidence on a scale of -100 to 100, with -100 indicating extreme lack of confidence, 100 indicating full confidence and 0 indicating a neutral opinion. The long-term average of the series is around -14.

Recommended for you

Upcoming Events