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31 May, 2012

Economic Sentiment Indicator Falls Sharply in Both EU and Eurozone


Brussels, 30 May 2012 (Europa Press Release) – The Economic Sentiment Indicator (ESI) decreased sharply in May, falling by 2.7 points in the EU and by 2.3 points in the euro area, to 90.5 and 90.6, respectively. In both zones the decline was driven by falling confidence in all business sectors, especially in industry and retail trade. By contrast, confidence increased among consumers in both the EU and the euro area.

The ESI decreased in most EU Member States and in all of its largest Member States, with the UK (-4.7), Italy (-4.3) and the Netherlands (-3.9) reporting the sharpest decreases, followed by France (-1.5), Germany (-1.4), Spain (-1.0) and Poland (-0.8). The ESI remains above its long-term average only in Germany.

Confidence in industry deteriorated markedly in both the EU (-3.5) and the euro area (-2.3), based mainly on a strong deterioration in managers’ assessment of their companies’ current level of order books. Moreover, production expectations deteriorated sharply in the EU and to a lesser extent in the euro area. Also, in both regions, the assessment of the adequacy of current level of stocks of finished products worsened. Managers’ assessment of their companies’ past production and current level of export order books also deteriorated in both regions.

Confidence in services went down in both the EU (-2.3) and the euro area (-2.5), mirroring a marked deterioration in all three components, namely the assessment of the past business situation, past demand and demand expectations. Confidence in retail trade witnessed the largest decrease among the sectors in both the EU (-6.1) and the euro area (-7.0), based on a sharp worsening in the perceived present and the expected business situation. Also retailers’ assessment of the adequacy of current volume of stocks deteriorated. Although at a slower pace, declines in construction confidence in both the EU (-2.0) and the euro area (-2.6) added to the negative overall evolution.

In both regions, employment plans were further revised down for all business sectors, with the largest falls occurring in services and manufacturing in the EU. At the same time, selling price expectations decreased significantly in industry, construction, services and retail trade.

By contrast, confidence among consumers improved by 0.8 points in the EU and by 0.6 points in the euro area, based mainly on improved expectations about the future general economic situation and a significant easing of unemployment fears in both regions. Consumers’ assessment of their own financial situation remained unchanged in the EU and worsened slightly in the euro area.

Confidence in financial services – not included in the ESI – decreased in both the EU (-1.4) and the euro area (-2.5) due to sharply decreasing demand expectations. At the same time, managers’ assessment of past demand and the past business situation improved.

Download the full data with charts and graphs here.