Economic sentiment in EU continues to recover from historic lows - survey

Even though the European Central Bank has predicted that the eurozone economy could shrink by more than five per cent this year, the Economic Sentiment Indicator for the EU and the eurozone picked up in May - for the second month in a row - although from a very low level and at a slower pace than in April, when a clear rebound was observed.

The ESI increased by 2.8 points in the EU, and by 2.1 points in the eurozone, to 66.7 and 69.3 respectively, according to the European Commission's Directorate General for Economic and Financial Affairs.

There was a significant increase in sentiment in Malta, with the ESI increasing by 3.4 points to 77.9, the highest figure since November of last year.

This increase in the ESI was a result of a clear improvement in sentiment in the retail sector which rose markedly in both regions, by four points in the EU and by five points in the eurozone, followed by services which increased by four points in the EU and one point in the eurozone.

Industry registered a smaller increase, two points and one point respectively, while sentiment in both construction and among consumers declined in the EU, by one and two points respectively, and remained stable in the eurozone.

The majority of member states registered an improvement. Among the largest member states, Italy (+5.3 points), the UK (+4.8), and the Netherlands (+3.1) witnessed significant increases in sentiment, while the rise was less marked in France (+1.5), Poland (+1.2) and Germany (+0.9). Spain registered a slight decrease (-0.9) as a result in a deterioration of sentiment in services.

The financial services confidence indicator - not included in the ESI - improved by three points in the EU and remained stable in the eurozone. The positive development in the EU reflects a rise in managers' assessment of the business situation, demand for their services, and expectations of demand, whereas the underlying components in the eurozone show more of a mixed picture.

The European Commission's directorate general for Economic and Financial Affairs conducts regular harmonised surveys for different sectors of the economies in the EU.