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31 January 2019

January 2019: Economic Sentiment decreases markedly in both the euro area and the EU


In January 2019, the Economic Sentiment Indicator (ESI) decreased markedly in both the euro area (by 1.2 points to 106.2) and the EU (by 1.4 points to 106.1).

Euro area developments

The deterioration of euro-area sentiment resulted from lower confidence in industry, services and retail trade, while confidence improved in construction and, to a lesser extent, among consumers. Amongst the largest euro-area economies, the ESI rose only in France (+0.5), while it decreased in Germany (−0.8) and, more significantly so, in Italy (−1.3) and the Netherlands (−4.1). The ESI remained broadly unchanged in Spain (+0.1).

The strong decrease in industry confidence (−1.8) resulted from managers' more pessimistic views on all three components, i.e. production expectations, the current level of overall order books and the stocks of finished products. Managers' assessments of the past production and export order books – which are not included in the confidence indicator – deteriorated significantly, too. The marked decline in services confidence (−1.2) was driven by managers' more pessimistic views on the past business situation and past demand, while their demand expectations remained virtually unchanged. The slight increase in consumer confidence (+0.4) reflected households’ more positive assessments of both their past and future financial situation, while their expectations about the general economic situation and their intentions to make major purchases remained (broadly) stable. The strong decline in retail trade confidence (−1.8) resulted from more negative views on both the present and expected business situation and, to a lesser extent, the adequacy of the volume of stocks. Increasing construction confidence (+0.9) was fuelled by managers' more optimistic employment expectations, while their assessment of the level of order books worsened. Finally, financial services confidence (not included in the ESI) decreased markedly (−3.1), reflecting strong deterioration in managers' demand expectations and their assessment of the past business situation, while appraisals of past demand remained virtually unchanged.

Employment plans saw a significant improvement in construction and a slight improvement in retail trade, while employment plans somewhat worsened in services and deteriorated strongly in industry. Selling price expectations increased slightly in services, while they decreased in retail trade, construction and, more importantly so, in industry. Also consumer price expectations dropped in January. 

EU developments

The marginally stronger decline of the headline indicator for the EU (−1.4) was mainly due to the strong deterioration of sentiment in the largest non-euro area EU economies, the UK (−1.7) and Poland (−3.6). While industry confidence worsened markedly in line with the euro area, the deterioration of EU confidence in services and retail trade was less marked than in the euro area. In contrast with euro-area developments, EU confidence in construction and among consumers remained broadly stable. As regards financial services confidence, the drop in the EU aggregate was in line with euro-area developments.

Managers' employment expectations were in line with those for the euro area for industry and services, where they worsened. In contrast to the euro area, employment expectations also weakened in retail trade and construction. Price expectations declined in line with those for the euro area in industry and construction, while, in contrast to the euro area, they decreased strongly in retail trade and edged down in services. 

Full press release



© Eurostat


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