EMU: EC Economic Sentiment

Highlights

The June 2026 survey presents a mixed but gradually improving picture of the euro area economy. The economic sentiment indicator (ESI) rose to 95.0, reflecting stronger confidence across industry, services, retail trade and consumers, although it remained below its long-term average of 100. The improvement was most pronounced in the Netherlands, Germany and Italy, suggesting that business and consumer confidence is beginning to recover after recent economic weakness. Higher production expectations in industry, stronger anticipated demand in services, and improved consumer perceptions of future economic and household financial conditions indicate that domestic demand may strengthen in the near term.

Despite the improvement in sentiment, the employment expectations indicator (EEI) declined sharply to 92.2, signalling growing caution among firms regarding hiring intentions. Employment plans weakened across retail trade, services and construction, implying that businesses remain uncertain about the durability of the recovery despite improving confidence. Construction remained the weakest-performing sector, with declining confidence and weaker employment prospects.

Inflationary pressures also showed signs of easing. Selling price expectations continued to moderate across all sectors, while consumers reported lower inflation expectations, although both measures remained above historical averages. At the same time, the decline in the economic uncertainty indicator suggests that businesses and households are becoming more optimistic about future conditions. In essence, the latest report suggests a fragile recovery characterised by improving confidence and easing inflation pressures, but one that continues to face labour market and growth challenges. These latest updates take the RPI and RPI-P to 21, meaning that economic activities are now outperforming market expectations in the euro area.

Market Consensus Before Announcement

Economic sentiment seen somewhat better at 94.1 in June from 93.5 in May in response to lower energy costs and apparent progress toward a settlement in the US-Iran war. Sentiment remains depressed relative to January.

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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