December 2006: Economic sentiment stabilises in both the EU and the euro area

The Economic Sentiment Indicator (ESI) in the EU and the euro area remained broadly stable in December, decreasing by 0.2 of a point. At 112.9 for the EU and 110.1 for the euro area, the indicator still stands well above its long-term average.

Economic sentiment indicator (s.a.)
EU: Dec. 112.9

Euro area: Dec. 110.1

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The stabilisation in the sentiment indicator for the EU is the combined result of improved sentiment in the services sector and unchanged confidence among industrials, builders, and consumers, offsetting a sharp decline in confidence in the retail trade sector (-4). The sector developments were somewhat different for the euro area: the indicator for industry and services remained unchanged, while that for consumers increased and those for the retail trade and construction sectors decreased.

At the individual country level, the picture is rather mixed. Among the large Member States, confidence improved in Poland (+4.4), Spain (+3.4) and in Italy (+0.3), while it decreased in France (-2.0) and Germany (-0.3), and remained stable in the UK.

Industrial confidence indicator (s.a.)

EU: Dec. 5

Euro area: Dec. 6

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In December, the industrial confidence indicator remained unchanged in both the EU and the euro area. In both areas, the indicators are currently above their long-term averages and their peaks recorded in 2000.

In both the EU and euro area, managers’ production expectations turned less positive. However, while managers' assessments of order books and of stocks of finished products remained stable in the EU, they improved in the euro area.

Among the large Member States, Spain (+5) and Poland (+1) recorded an increase in confidence, whereas managers in Germany (-2), France (-2) and in the UK (-1) became slightly more pessimistic. In Italy, industrial confidence remained virtually unchanged.

Service confidence indicator (s.a.)

EU: Dec. 21

Euro area: Dec. 19

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Since April 2006, the service confidence indicator in both the EU and the euro area has been above its long-term average. In December, it increased further in the EU and remained unchanged in the euro area.

All the components of the confidence indicator contributed to the rise in the EU indicator. Managers in the euro area were more positive concerning the recent evolution of demand, while they were less positive regarding the expected evolution of demand. Their assessment of the current business situation remained stable.

Among the large Member States, the service indicator is well above its long-term average in all countries except Spain. In December, the UK (+6), Spain (+4), Germany (+2) and Poland (+1) registered a rise in confidence, while the service confidence indicator declined somewhat in France (-1) and more markedly in Italy (-4).

Consumer confidence indicator (s.a.)

EU: Dec. -6

Euro area: Dec. -6

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In December, consumer confidence was unchanged in the EU and improved somewhat in the euro area. In both areas, the indicator has been on an upward trend since mid-2005 and although the levels are currently above their long-term averages, they are significantly below the record levels of 2000.

The overall minor change of the indicator in both areas is reflected in broadly stable underlying components. While consumers did not expect major changes in their own financial situation and their own savings, they became slightly more positive with regard to the general economic situation and prospects for employment.

At the country level, the results are mixed. The consumer confidence indicator improved in Italy (+4), Germany (+3) and Poland (+3). Meanwhile, consumer confidence decreased in France (-4) and the UK (-1) and remained stable in Spain.

Retail trade confidence indicator (s.a.)

EU: Dec. 1

Euro area: Dec. 0

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In both the EU and the euro area, the retail confidence indicator registered a significant decrease in December, although remaining well above its long-term average level.

In the EU, retailers' assessments of both the current and the future business situation became more pessimistic, and their appraisal of the volume of stocks remained unchanged compared with November. In the euro area, the general pattern is broadly the same but retailers were slightly more satisfied with the volume of stocks.

The picture among the large Member States is quite diverse. The deterioration in the EU confidence is mainly due to the substantial decrease recorded in Italy (-19). Sizeable decreases were also registered in the UK (-8), and to a lesser extent in France (-1). Retailers became more optimistic in Spain (+3), Poland (+3) and in Germany(+2).

Construction confidence indicator (s.a.)

EU: Dec. 2

Euro area: Dec. 2

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In the EU, the construction confidence indicator was unchanged in December, while it decreased slightly in the euro area (-1). Thus, the indicator remained at a very high level, well above its long-term average.

For both the EU and the euro area, developments in the indicator are the result of diverging movements in the two underlying components. While managers' assessment of order books improved, their employment expectations worsened.

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Among the large countries, construction managers became more optimistic in Poland (+4) and in the UK (+3), while they were less optimistic in Italy (-5). Construction managers' confidence in Germany, Spain and France remained stable.

The next Business and Consumer Survey is due to be published on 31 January 2007.

Full tables are available on:

http://ec.europa.eu/economy_finance/indicators/businessandconsumersurveys_en.htm