Brussels, 29 April 2014
April 2014: Economic Sentiment slips in the euro area, rises further in the EU
In April the Economic Sentiment Indicator (ESI) decreased slightly in the euro area (by 0.5 points to 102.0), while it continued to increase in the EU (by 0.9 points to 106.2).
Economic sentiment indicator (s.a.)
April EU: 106.2 - Euro Area: 102.0
Euro area developments
In the euro area, the slight decrease in sentiment was mainly due to a worsening of confidence in services and construction, which are the two sectors where confidence still scores below its long-term average. In industry and retail trade, sentiment remained virtually unchanged compared to March. Confidence among consumers improved. Amongst the five largest euro area economies the ESI declined in the Netherlands (-1.0), Spain (-1.0) and Germany (-0.4), remained broadly stable in France (-0.3) and increased slightly in Italy (+0.5).
Industry confidence remained broadly unchanged (-0.3), reflecting a marked decrease of managers' production expectations which was mitigated by a brighter appraisal of the level of overall order books and a broadly stable assessment of stocks of finished products. Of the questions not included in the confidence indicator, both the level of past production and the current level of export order books were considered more negatively. The decrease in services confidence (-1.0) resulted from worsened assessments of the past business situation and past demand, while views on expected demand remained broadly stable. Consumer confidence improved (+0.7) thanks to consumers' more positive views on the future general economic situation and the level of future unemployment, while their savings expectations decreased slightly and views on their households' expected financial situation remained broadly unchanged. The flat development in retail trade confidence (-0.1) was the result of an important increase in managers' expected business situation, which was cancelled out by a more negative assessment of both the volume of stocks and the present business situation. The decrease in construction confidence (-1.6) was mainly due to a strong decline in managers' employment expectations, while their assessment of the level of order books remained flat. Financial services confidence (not included in the ESI) showed the sharpest increase since the beginning of 2012 (+8.1). Strong increases were registered in all three components of the confidence indicator (past business situation, past demand and demand expectations).
Employment plans were revised downwards in industry and construction, while improving in retail trade and remaining virtually unchanged in services. Selling price expectations declined in industry and construction, while remaining broadly unchanged in services and retail trade. Also consumers' price expectations were revised downwards, falling to the lowest level since March 2010.
Contrasting with the euro area, the headline indicator for the EU improved (+0.9), thanks to a strong increase in sentiment in the largest non-euro area EU economy (UK, +6.7). Sentiment in Poland remained broadly unchanged (-0.1). As in the euro area, confidence in the EU improved among consumers and declined in construction. However, it improved in all the other business sectors. The improvement was particularly strong in retail trade. These developments were mainly due to significant increases in industry, services and retail trade confidence in the UK.
EU employment plans in construction were revised down and consumers expected a lower level of unemployment in line with the euro area results. In contrast with the euro area, managers in industry and services revised their employment plans upwards, while employment expectations in retail trade decreased. While selling price expectations in construction and consumer price expectations declined in line with the euro area, EU selling price expectations where revised upward in services and retail trade and remained broadly stable in industry.
Quarterly survey in manufacturing (conducted in April)
In the euro area manufacturing sector, the estimated rate of capacity utilisation slipped by 0.6 points to 79.5%. Accordingly, the share of managers assessing their current production capacity as 'more than sufficient' (in view of current order books and demand expectations) edged up. Also managers' export volume expectations worsened. In line with these findings, managers' assessment of their competitive position on foreign markets outside the EU declined compared with the previous survey carried out in January. Finally, despite managers' improved appraisal of overall new orders, the estimated number of months' production assured by orders on hand remained unchanged. Developments in the wider EU were largely in line with euro area developments.
Industrial investment survey (conducted in March/April)
According to the bi-annual investment survey carried out in March/April, real investment in the manufacturing industry is expected to increase by 5% in the euro area in 2014. In the previous survey conducted in October/November of last year managers expected an increase of 4%. As for real investment in 2013, managers now estimate a decline of 2%, unchanged compared with the October/November survey.
In the wider EU, real investment growth in manufacturing is expected to rise to 6% in 2014, one percentage point higher than according to the October/November survey. Regarding 2013, the current estimation points to a 3% increase, up from 1% as estimated in October/November.
Industrial confidence indicator (s.a.)
April EU: -1.9 - Euro Area: -3.6
Service confidence indicator (s.a.)
April EU: 8.9 - Euro Area: 3.5
Consumer confidence indicator (s.a.)
April EU: -5.7 - Euro Area: -8.6
Retail trade confidence indicator (s.a.)
April EU: 3.0 - Euro Area: -2.6
Construction confidence indicator (s.a.)
April EU: -25.9 - Euro Area: -30.3
Financial services confidence indicator (n.s.a.)
April EU: 16.1 - Euro Area: 10.9
The next Business and Consumer Survey is due to be published on 28 May 2014.
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