30 May 2018

May 2018: Economic Sentiment stabilises further

In May, the Economic Sentiment Indicator (ESI) remained broadly unchanged in the euro area again (-0.2 points to 112.5). Sentiment picked up slightly in the EU (+0.4 points to 112.8), 1 offsetting a roughly commensurate drop in April.

Euro area developments

Broadly unchanged euro-area sentiment resulted from decreases in industry and services confidence which were largely offset by strong increases in the retail trade and construction sectors. Confidence among consumers remained virtually flat. Amongst the largest euro-area economies, the ESI rose in the Netherlands (+1.2) and remained broadly unchanged in Germany (+0.1), while it decreased in France (-1.8), Spain (-1.2) and Italy (-1.0). Declining industry confidence (-0.5) resulted from managers' markedly more pessimistic production expectations and worsened views on the stocks of finished products, which were only partly offset by a strong improvement in managers' assessment of the current level of overall order books. Of the questions not included in the confidence indicator, managers' assessment of past production was unchanged, while their views on export order books improved markedly. The small decrease in services confidence (-0.4) was mainly due to a decrease in managers' assessment of past demand, while their assessment of the past business situation and demand expectations was unchanged. Virtually unchanged consumer confidence (-0.1) was the result of a marked decrease in consumers' assessment of the future general economic situation, which was counterbalanced by a strong increase in their savings expectations. Views on households' future financial situation and unemployment remained broadly stable. The strong increase in retail trade confidence (+1.4) resulted from improvements in all its components: managers' assessments of the present business situation and the adequacy of the volume of stocks improved markedly, while the increase was milder regarding the expected business situation. The notable rise in construction confidence (+2.4), which lifted this indicator to its highest level since 1990, was fuelled by important upward revisions of both managers' employment expectations and their assessment of the level of order books. Finally, financial services confidence (not included in the ESI) decreased markedly (-3.8), reflecting deterioration in all its components (managers' appraisals of past and expected demand and the past business situation).

Employment plans saw marked downward revisions in industry and retail trade, while employment plans remained broadly unchanged in services and improved strongly in the construction sector. In the latter, the indicator reached its highest level since March 1990. Selling price expectations increased markedly in retail trade and construction, while they decreased slightly in industry and remained broadly unchanged in services. Also consumer price expectations increased in May.

EU developments

The small increase of the headline indicator for the EU (+0.4) was driven by improved sentiment in the largest non-euro area EU economies, the UK (+1.9), and – to a lesser extent – Poland (+0.6). While confidence worsened slightly in industry and improved markedly in retail trade and construction in line with euro area trends, EU confidence in services and among consumers improved slightly. Further in line with euro-area developments, EU confidence fell markedly in the financial services sector.

Contrary to the euro area, employment expectations decreased in services and remained mainly unchanged in retail trade and construction. While EU price expectations were in line with those for the euro area for industry (decrease), retail trade and construction (strong increases), prices were expected to rise also in services.

Press release

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