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Europe — Economic Sentiment Indicator on the up after July's surge

31 August 2010

The Economic Sentiment Indicator (ESI), published by the European Commission, continued to improve in both the entire European Union (EU) and the Euro area in August 2010 after the surge in July, albeit at a slower pace.

It rose to 102.7 (up by +0.6 of a point) in the EU and to 101.8 (up by +0.7 of a point) in the Euro area. In both the EU and the Euro area the ESI is above its long-term average of 100.

Among the largest Member States, the UK registered the most significant gain (+1.5), followed by Germany (+1.1) which remains in the lead. Improvements were less pronounced in Spain (+0.9) and in France (+0.4). In contrast, sentiment deteriorated in Italy (-0.9), Poland (-0.9) and even more so in the Netherlands (-2.1).

Sentiment in industry improved (by +1 point) in the EU and remained broadly unchanged in the Euro area. The majority of respondents in this sector reported sizeable improvements in their order books. However, managers were cautious regarding their production expectations.

Confidence among consumers improved markedly (+3) in both the EU and the Euro area. Widely-felt optimism about the general economic situation as well as further considerable easing of unemployment fears set the tone. The confidence indicator in services decreased by -1 point in the EU and improved by +1 point in the Euro area. Managers' pessimistic assessment of the past business situation in the UK explains the difference in trends between the two areas. Sentiment in the retail sector gained +1 point in the EU and remained broadly unchanged in the Euro area. The sentiment indicator in construction remained broadly unchanged in both regions.

After a sharp drop in July, confidence in financial services (not included in the ESI) registered a significant increase in the EU (+7) due to a substantially brighter future demand outlook. In the Euro area the confidence indicator remained broadly unchanged, after having improved in July.

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