IP/06/240
Brussels, 28th February 2006
February 2006: Economic sentiment continues to improve in both the EU and the euro area The upward trend of the Economic Sentiment Indicator (ESI) that began in the summer of 2005 continued in February. Compared with January, the indicator improved by a robust 1.8 points in the EU and by 1.2 points in the euro area. In both areas, the indicator is now considerably above its long term average.
Economic sentiment indicator (s.a.) EU: Feb. 104.1
Euro area: Feb. 102.7
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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.
Developments in the sector-level confidence indicators were also predominantly positive. The EU registered a growth in confidence of 3 points in the industry sector and 1 point in both the retail sector and among consumers. In the construction sector, confidence remained unchanged. Only the services sector registered a slight fall in confidence. The euro area presents a very similar picture. At 2 points, the increase of confidence in the industry sector was slightly smaller than in the EU as a whole. Moreover, while EU construction confidence did not witness any change, builders in the euro area reported a small decline in confidence.
At the country level, the picture is mostly positive. All of the larger Member States reported an improvement in sentiment with the exception of Spain, where the ESI fell by more than 4 points. Developments in Poland and the UK are worth noting. The slight improvement of the indicator in Poland adds further to the record level reached in January. In the UK, the ESI picked up by more than 6 points after a four-consecutive-month decline. Germany, France and Italy saw further increases in the ESI of around 1 or 2 points.
Industrial confidence indicator (s.a.) EU: Feb. -3
Euro area: Feb. -2
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In February, industrial confidence increased by 3 points in the EU and by 2 points in the euro area. These developments extend the gradual upward trend the indicator has been following since the second quarter of 2005.
The positive development of the confidence indicator in the EU was reflected in all of its underlying components. The strongest improvements were observed in the assessment of order books and the stock of finished products. Industrial managers were also more optimistic with regard to their production expectations. The picture for the euro area is very similar, with all three components showing improvements of 1 or 2 points.
At the individual country level, the picture is more mixed. Of the larger Member States, Italy and Poland saw a small fall in confidence. In the other large Member States, industrial managers were more optimistic. Among the cases worth noting are France with +3 points and the UK, where the indicator increased by 7 points.
Service confidence indicator (s.a.) EU: Feb. 14
Euro area: Feb. 14
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After the increase in January, confidence in the services sector fell by 1 point in both the EU and the euro area. Since the end of 2003, the indicator has been fluctuating quite erratically within a range of 8 to 15 points, without revealing a clear trend.
Among the three underlying components of the confidence indicator, setbacks in the assessment of the current business situation and the evolution of demand in recent months were behind the overall decline of confidence in the EU. The strong improvement in the expected evolution of demand could not compensate for the fall in these two components. However, the distinct improvement in expectations about future demand may foreshadow a pick up of confidence in the months to come.
At the country level, France and the UK saw a rise in confidence. In Spain, on the other hand, confidence in services plunged by 13 points and is now at the lowest level since it was first calculated in October 1996. While the German indicator recorded a negative two points, services confidence was stable in Italy.
Consumer confidence indicator (s.a.) EU: Feb. -8
Euro area: Feb. -10
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Consumer confidence improved slightly in both the EU and the euro area. After the temporary dip during the first half of 2005, the indicators now appear to be regaining the upward trend that started at the beginning of 2003.
The growth of confidence in the EU was due to more positive expectations of consumers with regard to the general economic situation and their savings. Expectations concerning their own financial situation and the unemployment situation remained unchanged.
At the country level, developments were generally positive. Of the larger Member States, only Germany and Spain saw a small decline in confidence among their consumers. France, Poland and the UK reported improvements in consumer confidence of 2 points, while Italy saw a considerable increase of 4 points. In Poland, the confidence indicator reached a record high.
Retail trade confidence indicator (s.a.)
EU: Feb. -5
Euro area: Feb. -5
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Having remained stable in January, retail confidence rose by 1 point in the EU in February. The indicator has thus extended the upward trend that started during the summer of 2005. In the euro area, retail confidence also improved by 1 point. After last month’s analogous decline, the indicator thus regained the relatively high level reached in December and October of last year.
The rise in overall confidence in the EU was due to a more positive assessment by retailers of both the present business situation and the expected business situation. Views concerning the volume of stocks remained unchanged among EU retailers. The improvement in the euro area was mainly driven by distinctly brighter expectations regarding the business situation.
Among the larger Member States, a rather divergent picture emerges. Italian retailers reported a drop in confidence of a full 8 points, while Germany registered a surge of retail confidence of 7 points. German confidence is now above its long term average for the first time since the summer of 2001.
Construction confidence indicator (s.a.)
EU: Feb. -4
Euro area: Feb. -5
[Graphic in PDF & Word format]
After the increase of 2 points in January, the construction confidence indicator in the EU did not change in February. Builders in the euro area reported a slight drop in confidence of 1 point. These developments are in line with the broadly upward path that both indicators have been following since the second half of 2003.
Looking at the underlying components, builders in both the EU and the euro area held more negative views of their order books compared to January. With regard to employment expectations, construction managers in the EU did not change their views, while those in the euro area were slightly more optimistic.
[Graphic in PDF & Word format]
At the country level, developments in Spain stand out. After having reached a peak of 39 points in November last year, confidence has fallen sharply since then; it now stands at 6 points, after a fall of 15 points in February. In Germany, confidence has recovered steadily over the last twelve months. In February, the indicator increased by another 4 points.
The next Business and Consumer Survey is due to be published on 31 March 2006. Full tables are available on:
http://ec.europa.eu/economy_finance/indicators/businessandconsumersurveys_en.htm
