IP/06/95
Brussels, 31st January 2006
January 2006: Further increase of economic sentiment in both the EU and the euro area The Economic Sentiment Indicator (ESI) continued the upward trend that began in the summer of 2005. In January 2006, the indicator improved by a robust 1.3 points in the EU and by 1.2 points in the euro area. For the euro area, the indicator is now at the highest level since the summer of 2001.
Economic sentiment indicator (s.a.) EU: Jan. 102.6
Euro area: Jan. 101.8
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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 confidence indicators of the various sectors were also positive. The EU registered a growth of confidence in the services sector, the retail sector and in the construction sector, while, in industry and among consumers, the level of confidence remained unchanged. In the euro area, unchanged confidence among consumers and in the retail sector was accompanied by improvements in the industry, services and construction sectors. In short, neither the euro area nor the EU witnessed a fall in confidence in any of the sectors. This strengthens the expectation that the upward trend will continue in the coming months.
At the country level, the picture is mixed. Germany, Italy and Poland showed an improvement in confidence, with Poland reaching an all-time high. In Germany, the headline indicator improved by almost 3 points and is now above its long-term average of 100 for the first time since May 2001. While the French indicator remained unchanged, Spain and the UK saw a drop in confidence. The decrease in the UK was the fourth consecutive fall.
Industrial confidence indicator (s.a.)
EU: Jan. -6
Euro area: Jan. -4
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In January, industrial confidence increased by 1 point in the euro area and remained unchanged in the EU. These developments extend the gradual upward trend the indicator has been following since the second quarter of 2005.
Developments in the individual underlying components were quite homogeneous. For the EU, production expectations showed a small improvement, while the other two components (order books and the stocks of finished products) remained unchanged. For the euro area, all three components improved by 1 percentage point.
At the individual country level, the picture was rather mixed. Of the large Member States, Germany and Italy saw confidence grow by 2 points, France and Poland registered a small drop in confidence, while industry managers in the UK and Spain became considerably more pessimistic.
Service confidence indicator (s.a.)
EU: Jan. 15
Euro area: Jan. 15
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After the drop in December 2005, confidence in the services sector increased by 3 points in the EU and by 2 points in the euro area. From a longer-term perspective, despite the uneven recovery since March of last year, the indicator appears more or less flat since the end of 2003.
Among the three underlying components of the confidence indicator, the assessment of the current business situation and the evolution of demand in recent months contributed strongly to the overall growth of confidence in the EU. The lack of improvement in the expected evolution of demand component may be indication of a need for caution over the sustainability of the recovery. The euro area shows a similar pattern with regard to the three components, although the expectations component decreased mildly.
At the country level, developments in Germany and the UK were most noteworthy, with confidence improving by 6 points. At the other end of the spectrum we find Spain, where confidence dropped by 5 points. In the remaining three larger Member States, confidence was more or less unchanged.
Consumer confidence indicator (s.a.)
EU: Jan. -9
Euro area: Jan. -11
[Graphic in PDF & Word format]
Consumer confidence remained unchanged in both the EU and the euro area. Despite this pause in January, the indicators appear to have established a slight upward trend since mid-2005. In both areas, consumer confidence is back at levels last reached in 2002.
The stability of the confidence indicator is reflected in the underlying components. Since last month, EU consumers have not altered their expectations with regard to their own financial situation, their savings or the unemployment situation. Consumers were slightly more positive in their expectations concerning the general economic situation.
No major changes in confidence were apparent in the large Member States. German, French and Polish consumers were slightly more confident than last month. Consumers in Spain and Italy, on the other hand, reported a small drop in confidence. Consumer confidence in the UK remained unchanged and has now been standing at the same level for 4 consecutive months.
Retail trade confidence indicator (s.a.)
EU: Jan. -4
Euro area: Jan. -4
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Following an improvement of 3 points in December, retail confidence in the EU rose by another 2 points. Thus, the indicator stays on the recovery path that started during the summer of 2005. In the euro area, retail confidence remained unchanged.
The rise in overall confidence in the EU was due to a strong improvement in retailers’ views of the present business situation, and a more positive assessment of their volume of stocks. Expectations with regard to the business situation did not change among EU retailers. In the euro area, a more positive view of the volume of stocks was offset by a deterioration in expectations of the future business situation.
Among the larger Member States, a rather divergent picture emerges. Retailers in Spain and France became far less confident, while confidence rose drastically among German and British retailers. For the UK, the indicator rose by a full 9 points for the second month in a row. In Italy and Poland, confidence remained broadly unchanged.
Construction confidence indicator (s.a.)
EU: Jan. -4
Euro area: Jan. -4
[Graphic in PDF & Word format]
After the unexpected fall in December, the construction confidence indicator recovered in January. The indicator improved by 1 point in the EU and by 2 points in the euro area. These positive developments seem to extend the upward trend followed since the summer of 2005.
The rise in confidence was reflected in both underlying components of the indicator. The assessment of order books improved by 2 points in the EU and by 3 points in the euro area. Managers’ expectations concerning the employment situation improved by one point compared to last month.
[Graphic in PDF & Word format]
At the country level, there was a considerable growth of confidence in Germany, France, Italy and Poland. Spanish and British construction managers, on the other hand, were slightly less confident than one month ago.
The next Business and Consumer Survey is due to be published on 28 February 2006. Full tables are available on:
http://ec.europa.eu/economy_finance/indicators/businessandconsumersurveys_en.htm
