29 November 2018

November 2018: Economic Sentiment broadly stable in the euro area, down in the EU

Euro area developments

Broadly unchanged euro-area sentiment resulted from diverging developments in business and consumer confidence. While consumer confidence decreased markedly, business confidence remained stable (services, construction) or improved (slightly in industry, barely in retail trade). Amongst the largest euro-area economies, the ESI remained broadly stable in France (+0.2), Spain (-0.3) and the Netherlands (+0.1). It rose only in Germany (+0.6) and decreased markedly in Italy (-1.2).

Industry confidence increased slightly (+0.4), reflecting managers' more optimistic production expectations and views on their current levels of overall order books, while their assessments of the stocks of finished products worsened slightly. Of the questions not included in the confidence indicator, managers' assessment of past production improved strongly, while their assessment of export order books weakened. Unchanged services confidence (±0) resulted from an improvement in managers' assessment of past demand being offset by a deterioration in their demand expectations and appraisals of the past business situation. Consumer confidence decreased markedly (-1.2) due to a deterioration of all its components, i.e. consumers' unemployment and savings expectations and their views on their future financial situation and the future general economic situation; the decrease in the latter was particularly strong. Essentially stable retail trade confidence (+0.2) resulted from managers' more optimistic views on the present and expected business situation, which were mostly offset by worsening appraisals of the volume of stocks. Construction confidence was unchanged (±0), resulting from a combination of markedly improved employment expectations and strongly worsened assessments of the level of order books. Finally, financial services confidence (not included in the ESI) decreased strongly due to a deterioration of all its three components, i.e. assessments of past and expected demand, and of the past business situation.

Employment plans improved strongly in construction and, to a lesser extent, retail trade, while they deteriorated in services and remained broadly stable in industry. Selling price expectations increased markedly in industry and services, while they shrank in retail trade and, to some extent, construction. Consumer price expectations eased somewhat, interrupting the upward trend visible since mid-2018.

EU developments

The worse development of the ESI in the EU (-0.8) can be attributed to a sharp decrease of the sentiment indicator in the largest EU economy outside the euro area, the UK (-3.1); in Poland the indicator increased strongly (+2.2). From a sectoral perspective, confidence in industry improved in line with the euro area developments. Contrary to the euro area, sentiment improved also in construction, while it deteriorated in services and retail trade. Finally, the deterioration among consumers was somewhat less pronounced in the EU. Another difference between the two areas concerns retailers' selling price expectations, which increased sharply in the EU.

Full press release

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