EMU: EC Economic Sentiment

Highlights

The April 2026 survey reveals a broad-based confidence shock across the euro area, with both sentiment and labour market expectations deteriorating sharply. The decline in the economic sentiment indicator (93.0 after 96.2) and employment expectations indicator (91.7 after 96.3) below long-term averages, signals a shift from fragile recovery to renewed pessimism.

What is particularly concerning is the synchronised weakness across sectors. While industry appears superficially stable, this masks a drop in forward-looking production expectations, suggesting latent weakness in future output. Services and consumer confidence, however, show outright contraction, reflecting demand-side fragility driven by declining household financial expectations and reduced spending intentions.

Labour market signals are turning more cautious. Falling hiring plans alongside rising labour hoarding imply that firms are retaining workers but delaying expansion, a pattern consistent with uncertainty-driven stagnation. Inflation dynamics add a further layer of complexity. The surge in selling price expectations, coupled with rising consumer price perceptions, points to persistent cost pressures despite weakening demand, raising stagflationary risks.

Overall, the sharp rise in uncertainty indicates an economic environment characterised by low confidence, constrained demand, and policy-sensitive recovery prospects. These latest updates take the RPI to minus 38 and the RPI-P to minus 45, meaning that economic activities continue to lag market expectations in the euro area.

Market Consensus Before Announcement

Sentiment expected to show a decline to 95.6 in April from 96.6 in March amid concern over rising energy costs.

Definition

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.

Description

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.

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