Economic sentiment rises in both EU and eurozone

The upward trend in the Economic Sentiment Indicator continued in September in both the European Union and the eurozone. The ESI rose to 82.6 (+1.6 points) in the EU and to 82.8 (+2.0) in the eurozone.

The ESI is based on a business and consumer survey conducted by the European Commission’s Directorate-General for Economic and Financial Affairs.

The Commission, however, stressed that these levels are still well below the respective long-term averages and the September increases were the smallest since the upturn started in April. Earlier this week European Central Bank president Jean-Claude Trichet said he expected only a “very gradual recovery” and highlighted the exceptional uncertainty surrounding the outlook.

Developments at the country level are somewhat mixed, indicating divergent trends. Among the largest member states, France and The Netherlands recorded the most significant rises in sentiment (+4.7 and + 4.6 respectively), while Germany posted only a moderate increase (+1.5), mirroring a deceleration in the sentiment indicator for manufacturing. At the other end of the spectrum, sentiment worsened in Spain (-1.2) and in Italy (-1.3), while economic sentiment in the United Kingdom and Poland remained broadly unchanged.

In Malta economic sentiment declined slightly from 87.5 in August to 85.8 in September. In June and July it had increased by +4 and +6.4 respectively.

The indicator for industry increased in both the EU (+2.0) and the eurozone (+1.0), on the back of improving assessment of the level of stocks. The improvements in employment expectations, not included in the confidence indicator, that started in April levelled off in both areas.

As with the overall indicator, the improvement in confidence in services also decelerated: it stabilised in the EU and increased by two points in the eurozone. Confidence in retail trade and construction continued to rise at a steady pace (+1 for both sectors in the EU and the eurozone). Consumer confidence improved markedly (+3 in both areas) mainly driven by expectations, which were more optimistic on both the general economic situation and the unemployment outlook.

Confidence in financial services, not including in the ESI, bounced back strongly, by eight points in the EU and 13 points in the eurozone, reflecting a markedly improved assessment of the business situation.