Economic sentiment stable in EU, moderately down in eurozone

In May, the Economic Sentiment Indicator was broadly unchanged at 105.4 in the EU, while it decreased by 0.6 points to 105.5 in the eurozone. The overall decline in the eurozone was due to weakening confidence in all the business sectors, while sentiment improved among consumers.

The ESI is based on surveys conducted by the European Commission’s Directorate General for Economic and Financial Affairs.

In the EU, a worsening of sentiment in industry was offset by moderate gains in the other business sectors, while consumers’ confidence improved markedly.

Malta (-3 points), Netherlands (-4.6 points), Italy (-2.7) and France (-1.9) reported decreases, while the UK (+2.6) and Poland (+0.6) improved. Meanwhile, Germany (-0.1) remained broadly stable. The ESI remains above its long-term average in Germany, France, the Netherlands and the UK.

Although confidence remains far above its long-term average in the sector, industry contributed negatively to overall sentiment. Confidence in industry decreased by 1.7 points in both the EU and the eurozone – on the back of a drop in firms’ production expectations and a worsening assessment of the level of order books.

Managers were also more pessimistic about their export order books and past production, which declined substantially, while their appraisal of stocks continued to recover from historic lows.

Sentiment in services remained broadly unchanged in the EU (+0.3) and decreased in the eurozone (-1.2). The difference between the two regions reflects managers’ diverging views on expected demand, with an improvement in the EU and a deterioration in the eurozone.

Sentiment in the retail sector improved in the EU (+0.8), on the back of a very positive assessment of present business situation in the UK, whereas it declined in the eurozone (-0.7).

Sentiment in construction remained broadly unchanged in the eurozone (-0.3), while it improved slightly in the EU (+0.4), with the indicator remaining at very low levels in both regions.

Confidence among consumers increased in both the EU (+3.2) and the eurozone (+1.8), reflecting more optimism about the future general economic situation and decreasing unemployment fears. Consumers were also more confident about their households’ expected financial situation, especially in the EU.