Brussels, 30 October 2013
October 2013: Economic Sentiment improves in the euro area and the EU
In October the Economic Sentiment Indicator (ESI) increased by 0.9 points in the euro area (to 97.8) and by 1.1 points in the EU (to 101.8). While the upward trend observed since May has been continued, the magnitude and sectoral scope of the improvement in confidence has moderated compared to recent months.
Economic sentiment indicator (s.a.)
October EU: 101.8 - Euro Area: 97.8
Euro area developments
In the euro area, the ESI's increase was driven by improved confidence in industry and, to a lesser extent, among consumers. By contrast, confidence weakened in services, retail trade and construction. Economic sentiment improved in three out of the five largest euro area economies, i.e. the Netherlands (+3.3), France (+2.6) and Germany (+0.8), while it deteriorated in Spain (-2.2) and Italy (-2.0).
The marked increase in industry confidence (+1.8) resulted from improvements in all three components: managers' production expectations, their assessment of the current level of overall order books and, to a lesser degree, the assessment of the stocks of finished products. Also managers' assessments of the past production and the current level of export order books, which are not included in the confidence indicator, improved in October. Services confidence registered a small decrease (-0.5), resulting from worsened assessments of the past business situation and demand expectations, while the assessment of past demand remained virtually unchanged. Consumer confidence improved slightly (+0.4), continuing the upward trend since December 2012. This was mainly thanks to improving expectations about the future general economic situation and savings over the next 12 months. By contrast, consumers' unemployment expectations worsened somewhat and their views on the future financial situation of their households remained unchanged. Retail trade confidence decreased (-0.9) due to an important drop in managers' business expectations, while their views on the volume of stocks improved and their assessment of the present business situation remained virtually unchanged. Also confidence in the construction sector decreased (‑0.8), resulting from managers' markedly worsened assessment of order books, which outweighed the more cautious upward revision of employment expectations. Financial services confidence (not included in the ESI) decreased by 2.7 points. While the past demand was assessed more positively, demand expectations and views on the past business situation deteriorated.
Employment plans were revised upwards in industry and, to a lesser extent, construction. They remained virtually unchanged in services and worsened in retail trade. Selling price expectations increased in industry, while remaining broadly unchanged in services and retail trade and decreasing strongly in construction.
In the wider EU, the improvement in sentiment was slightly more pronounced (+1.1). On a sector basis, confidence in industry improved as well, albeit at a lower rate. However, confidence in services improved markedly and was slightly up in construction. Confidence in the retail trade sector decreased as in the euro area, while consumer confidence remained unchanged. The main reason for the sharp plus in services was markedly improving confidence in the largest non-euro area EU economy, the UK. Contrasting with developments in the euro area, the EU financial services confidence indicator improved (+2.5).
As in the euro area, employment plans in the EU were revised upwards in industry and construction, but also in services and retail trade. Selling price expectations differed only slightly in the EU, showing an increase also in services. Consumers' price expectations were revised upwards, in line with assessments in the euro area.
Quarterly survey in manufacturing (conducted in October)
In the euro area, managers' assessment of developments in overall new orders improved markedly, turning positive for the first time since July 2011. Also their export volume expectations were revised upwards (for the fourth consecutive quarter). In line with these findings, the figures show a slight increase in the number of months' production assured by orders on hand. Yet, managers' appraisal of their competitive position on foreign markets outside the EU worsened somewhat compared with the previous survey carried out in July. The estimated rate of capacity utilisation increased marginally to 78.4% and the share of managers assessing their current production capacity as 'not sufficient' (in view of current order books and demand expectations) increased. Developments in the wider EU were largely in line with euro area developments.
Industrial confidence indicator (s.a.)
October EU: -4.1 - Euro Area: -4.8
Service confidence indicator (s.a.)
October EU: 3.6 - Euro Area: -3.7
Consumer confidence indicator (s.a.)
October EU: -11.7 - Euro Area: -14.5
Retail trade confidence indicator (s.a.)
October EU: -1.2 - Euro Area: -7.8
Construction confidence indicator (s.a.)
October EU: -26.9 - Euro Area: -29.6
Financial services confidence indicator (n.s.a.)
October EU: 16.7 - Euro Area: 8.6
The next Business and Consumer Survey is due to be published on 28 November 2013.
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