Economic sentiment in EU continues its upward march

The Economic Sentiment Indicator in October rose to 86 (+3.4 points) in the EU and to 86.2 (+3.4) in the eurozone, according to the European Commission's Directorate General for Economic and Financial Affairs.

The DG ECFIN conducts regular harmonised surveys for different sectors of the economies in the European Union and in the applicant countries.

The improvement in October is the seventh consecutive increase in both series since March. These levels, however, are still well below the respective long-term averages. In Malta, the Economic Sentiment Indicator increased by a massive 7.3 points, the largest increase in a year.

The Industry sentiment, which rose by four points in the EU and by three points in the eurozone, was the largest contributor to the overall improvement in both areas. While the respondents are clearly more positive in their appraisal of order books and the level of stocks, it was the much more optimistic production expectations that really lifted sentiment.

The quarterly manufacturing survey confirms this positive development. Firms are utilising their capacity at a slightly higher pace than in the summer (the reading now stands at 71.4 per cent in the EU and 70.7 per cent in the eurozone), although utilisation rates are still far below their respective averages.

The survey participants reported significant improvement in new orders received in the past three months, and more favourable expectations about export orders in the next three months.

The majority of member states registered an improvement. Among the largest EU countries, Italy (+3.8), Germany (+3.4), the UK (+3.2) and France (+3.0) posted significant increases in sentiment, while the rise was more moderate in Poland (+2.3.), Spain (+1.9) and in The Netherlands (+1.1).

Confidence among consumers also improved, by two points in the EU and by one point in the eurozone, mainly driven by a more a optimistic general economic outlook.

Confidence in services increased by two points in the eurozone while it remained unchanged in the EU mainly due to falling confidence in the UK.

Construction continued to rise at a steady pace (+1 for both sectors in the EU and the eurozone).

Retail trade remained unchanged in the eurozone but declined by one point in the EU.

Confidence in financial services - not included in the ESI - stabilised in both regions after the strong increase recorded in September, reflecting a slight improvement in the business situation, while expectations of demand decreased marginally.