IP/06/1080
Brussels, 31st July 2006
July 2006: Further improvement of economic sentiment in both the EU and the euro area The Economic Sentiment Indicator (ESI) in both the EU and the euro area continued to rise in July, reaching the highest levels since the beginning of 2001. The indicator rose by 0.8 points in the EU and by 0.7 points in the euro area, up to 109.5 and 107.8, respectively. In both areas, sentiment has improved by more than 10 points over the last twelve months.
Economic sentiment indicator (s.a.) EU: July 109.5
Euro area: July 107.8
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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.
The rise in the sentiment indicator for the EU results from the developments in the industry and the construction sectors, where the confidence indicators improved, respectively, by 1 and 2 points and from an increase of 1 point in confidence among consumers. Managers in the retail trade sector reported a 2 point fall in confidence, while confidence in the services sector remained unchanged. For the euro area, the underlying pattern is broadly the same.
At the country level, the picture is quite mixed. However, the ESI increased in all the larger Member States. The UK and Poland recorded substantial improvements of 3.7 and 9.1 points, respectively. The ESI for France (+1.3), and Spain (+1) recorded a slight increase, while in Italy and Germany improvements of 0.7 and 0.2 points, respectively, were registered.
Industrial confidence indicator (s.a.)
EU: July 3
Euro area: July 4
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The industrial confidence indicator in both the EU and the euro area improved further in July. It has been on an upward trend since the second quarter of 2005. The indicator is now way above its previous peak reached in September 2004 and is approaching the peak attained in the year 2000.
The improved confidence was mainly due to a much more positive assessment of the order books. Industrial managers' evaluation of their stocks of finished products was slightly more positive for the EU and unchanged for the euro area, while their production expectations remained unchanged in the EU and improved marginally in the euro area.
Most of the EU Member States reported an increase in industrial confidence. Among the larger Member States only Italy recorded a slight decline in confidence, by 1 point. In Germany and Spain confidence remained unchanged, while managers in France (+1), the UK (+5) and Poland (+2) have become more optimistic.
Service confidence indicator (s.a.)
EU: July 18
Euro area: July 19
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Confidence in the services sector remained unchanged in both the EU and the euro area. The indicator continues to stand above its long-term average, at a level of 18 for the EU and 19 for the euro area.
Looking at the components of the confidence indicator, EU and euro area managers in the services sector were more optimistic with regard to the expected evolution of demand, while the assessment of the recent evolution of demand declined slightly. The assessment of the current business situation remained unchanged for the EU and improved somewhat in the euro area.
Among the larger Member States, only the UK registered a decline in confidence of 3 points. Germany, Spain and France saw a slight increase of 1 point in confidence while in Italy (+4) and in Poland (+3) the indicator improved more markedly.
Consumer confidence indicator (s.a.)
EU: July -7
Euro area: July -8
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Consumer confidence in the EU and in the euro area increased by 1 point in July, continuing the upward trend since mid-2005.
There has been no change in expectations about households' financial situation in the EU, while consumers in the euro area were somewhat more optimistic. In both the EU and the euro area, an increasing number of households think they will save money in the next 12 months. While households were slightly more optimistic concerning the future economic situation, their views on future unemployment remained unchanged.
At the country level, the results are mixed. While consumers in Germany and the UK reported a fall in confidence by 1 point, the indicator rose by 2 points in Italy, by 3 points in Poland and by 4 points in France. Confidence among Spanish consumers remained unchanged.
Retail trade confidence indicator (s.a.)
EU: July 1
Euro area: July -1
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After several months of improvements, the retail confidence dropped in both the EU and the euro area, by 2 and 3 points, respectively. The indicator, however, remains positive in the EU and well above the long-term average level in both the EU and the euro area.
The components that contributed negatively to the EU indicator were retailers' assessments of the future business situation and the volume of stocks, both deteriorating by 3 points, while retailers' views concerning their current business situation were unchanged. In the euro area, the pattern was broadly similar with the exception of the current business situation which decreased by 2 points.
The picture among the larger Member States is rather mixed. Retailers' confidence in Spain (+10) rose considerably, while the rise in Poland (+1) and in the UK (+3) was more modest. On the negative side, Germany (-6), France (-5) and Italy (-3) registered a drop in the retail trade confidence indicator.
Construction confidence indicator (s.a.)
EU: July 0
Euro area: July 1
[Graphic in PDF & Word format]
In both the EU and the euro area, the construction confidence indicator continued its upward movement which started in 2003 and reached its highest level since 1990.
In July, both components of the confidence indicator improved. Builders in the EU and the euro area made a more positive assessment of their order books and were more optimistic about their employment expectations than in June.
At the country level, developments are broadly positive. Builders in all the larger Member States reported an improved sentiment. Germany (+2), Spain (+8), France (+1), Italy (+1), Poland (+2) and the UK (+2) registered increased confidence levels [Graphic in PDF & Word format]
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The next Business and Consumer Survey is due to be published on 31 August 2006.
Full tables are available on:
http://ec.europa.eu/economy_finance/indicators/businessandconsumersurveys_en.htm
