IP/06/546
Brussels, 28th April 2006
April 2006: Economic sentiment improves strongly in both the EU and the euro area The Economic Sentiment Indicator (ESI) improved for the fifth consecutive month in both the EU and the euro area. The indicator for the EU increased by 2.9 points, while a more moderate improvement of 1.7 points was observed for the euro area. Since the recovery started about 1 year ago, the ESI has risen by around 10 points in both areas.
Economic sentiment indicator (s.a.) EU: Apr. 107.8
Euro area: Apr. 105.3
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The monthly economic sentiment indicator reflects general economic activity of the EU. This indicator combines assessments and expectations stemming from business and consumer surveys. The surveys are conducted in different sectors of the economy: industry, services, construction and retail trade as well as consumers.
The main impetus behind the rise of the sentiment indicator is the positive developments in the industry and the services sectors. Industrial confidence increased by 3 points in the EU and by 2 points in the euro area, while services confidence increased by 4 points in the EU and 3 points in the euro area. Confidence among consumers rose by 1 point in both areas, while confidence among managers in both retail trade and construction improved by 1 point in the EU and remained unchanged in the euro area.
At the country level, the picture is largely upbeat. The improvement of economic sentiment was particularly strong in the UK, where a rise of 10.3 points was recorded. Spain and Italy also recorded relatively solid improvements of 2.4 and 2.8 points respectively. More moderate rises were registered in Germany (+1.8) and France (+0.4), while Poland registered a drop in sentiment of 0.8 of a point.
Industrial confidence indicator (s.a.)
EU: Apr. 1
Euro area: Apr. 1
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After a moderate improvement in March, the industrial confidence indicator strengthened substantially in April. Confidence rose by 3 points in the EU and by 2 points in the euro area. Since the end of last year, the indicator has risen by a full 7 points in the EU and by 6 points in the euro area.
The increase in the confidence indicator was largely due to a marked improvement in the assessment of order books. With regard to the other components, managers in both the EU and the euro area held a more positive view on their stocks of finished products, while production expectations were unchanged.
At the individual country level, the picture is predominantly positive. Of the larger Member States, Germany, Italy, and particularly the UK registered strong growth in confidence of 4, 3, and 7 points, respectively. In France and Poland confidence increased more moderately by 1 point. The only drop in confidence was observed for Spain, where the indicator slipped by 2 points.
Service confidence indicator (s.a.)
EU: Apr. 19
Euro area: Apr. 18
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Following a small advance in March, confidence in the services sector saw a strong pick up in April, by 4 points the EU and by 3 points in the euro area. For the first time since the middle of 2001, the indicator is now above its long term average for the EU.
All three underlying components contributed to the build-up of confidence in the EU. The strongest contribution came from the assessment of the current evolution of demand, which improved by 6 points. Managers' assessment of the current business situation and their demand expectations rose by 3 and 4 points, respectively.
At the country level, the picture is generally positive. Developments in the UK and Italy are particularly noticeable: confidence improved by a remarkable 13 points in both countries. Since December of last year, when the indicator in the UK reached a low of -2, confidence in the UK has recovered by a full 25 points. Spain also registered a fairly strong rise in confidence of 7 points. In the other large Member States, no significant changes were observed.
Consumer confidence indicator (s.a.)
EU: Apr. -8
Euro area: Apr. -10
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Consumer confidence recovered from the small setback in March, with a correspondingly small improvement of 1 point during April. It seems that the indicator remains on the upward path that began during the second half of 2005.
The rise in confidence in the EU came as a result of more positive expectations among consumers concerning the general economic situation, their own financial situation and their savings. With regard to the unemployment situation, consumers in the EU did not change their expectations. The increased confidence in the euro area was due to distinctly more positive expectations of the general economic situation.
At the country level, the results were fairly mixed. Of the larger Member States, Germany, Spain, France and the UK saw moderate rises in confidence, while Italian and Polish consumers reported falling confidence, amounting to 2 points.
Retail trade confidence indicator (s.a.)
EU: Apr. -2
Euro area: Apr. -1
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After the improvement in March, retail confidence in the EU continued to improve by another point in April. Since the summer of 2005, the indicator has increased by 11 points and is now only 6 points below its record high. The indicator for the euro area remained unchanged after the large rise in the previous month.
The development in the EU was mainly due to a much more optimistic view on the expected business situation. Together with a slightly more positive assessment of the present business situation, this was sufficient to more than offset the negative effects arising from the assessments of volume of stocks.
Among the larger Member States, a very mixed picture emerges. France and especially Spain saw a strong growth in retail confidence by 4 and 11 points respectively. In Italy (-4) and Germany (-3), retailers lost some of their previous confidence. In Germany, this setback came after the indicator had grown by 20 points over the previous four months. In Poland and the UK, retail confidence remained unchanged.
Construction confidence indicator (s.a.)
EU: Apr. -3
Euro area: Apr. -3
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The construction confidence indicator for the EU improved by 1 point. Builders in the euro area reported unchanged confidence. These developments are in line with the slightly ascending path followed by the indicator since the second half of 2003.
The mounting confidence in the EU was a result of a much more positive assessment of the order books, which more than offset the more negative expectations with regard to the unemployment situation.
[Graphic in PDF & Word format]
At the country level, the developments were rather mixed. Germany continued the strong rise observed over the last twelve months with another increase of 6 points. Poland and Italy also registered growing confidence among builders. After a rather large fall of 8 points in April, preceded by an increase in March (+13) and a fall in February (-15), Spanish construction confidence has been behaving quite erratic during 2006. Confidence among French and British builders has been more stable, although it fell by 3 points in April. In all six large Member States, the indicator is above its long term average.
The next Business and Consumer Survey is due to be published on 31 May 2006. Full tables are available on:
http://ec.europa.eu/economy_finance/indicators/businessandconsumersurveys_en.htm
