In February 2019, the Economic Sentiment Indicator (ESI) remained broadly stable in the euro area (-0.2 points to 106.1), while it decreased in the EU (by 0.9 points to 105.3)
Euro area developments
Broadly unchanged euro-area sentiment resulted from weaker industry and construction confidence in combination with more upbeat signals from the services sector, as well as, to a lesser extent, retail trade and consumers. Amongst the largest euro-area economies, the ESI improved only in the Netherlands (+3.0), while it eased in France (-0.9) and Italy (-1.6). Sentiment in Germany (-0.1) and Spain (+0.0) remained practically flat.
Industry confidence deteriorated for the third month in a row (-1.0), due to 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. Of the questions not included in the confidence indicator, the appraisals of export order books aligned with the downward trend, whereas assessments of past production recovered significantly. Services confidence improved (+1.1), as managers were more upbeat on the past business situation and, to a lesser extent, past and expected demand. The slight increase in consumer confidence (+0.5) reflected households’ more benign views on their past and future financial situation, as well as the expected general economic situation. Households’ intentions to make major purchases, by contrast, were scaled back somewhat. Retail trade confidence edged up (+0.5), reflecting managers’ better take on the present and expected business situation, which were partially offset by slightly more negative views on the adequacy of the volume of stocks. Construction confidence clouded over (-2.0), with managers reporting more pessimistic employment expectations and worsened assessments of the level of order books. Finally, financial services confidence (not included in the ESI) remained flat (+0.0), as strongly deteriorated appraisals of past demand were offset by more benign views on the past business situation and brighter demand expectations.
Employment plans deteriorated in industry, retail trade and, particularly, construction, while they remained virtually unchanged in services. Selling price expectations moderated in industry, services and, to a lesser extent, retail trade and construction. Bucking the trend, consumer price expectations firmed in February.
The headline indicator for the EU dropped (-0.9), as sentiment in the largest non-euro area economy, the UK, deteriorated significantly (-4.5) and was only partly offset by improved sentiment in Poland (+1.4), the second largest non-euro area economy. From a sectoral perspective, EU confidence went broadly in lockstep with euroarea developments, except for the services sector, which posted a decline. Furthermore, financial services confidence in the EU weakened (-1.5), rather than staying flat.
EU managers' employment expectations dropped in services and, less so, industry, while they improved mildly in construction and stayed virtually unchanged in retail trade. Price expectations, by contrast, developed broadly in line with those in the euro area, easing in industry and services, while firming among consumers. Yet, price expectations went up among EU retail trade and construction managers, too.
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