InsiderEconomyRecovery of EU Economic Sentiment continues at slower speed

Recovery of EU Economic Sentiment continues at slower speed

In September 2020, the recovery of the Economic Sentiment Indicator (ESI) continued, albeit at a somewhat slower speed.

Registering still noticeable increases in the euro area (3.6 points up to 91.1) and the EU (3.4 points up to 90.2), the ESI in both regions has so far recovered nearly 70% of the combined losses of March and April, according to data released today by DG ECFIN of the European Commission.

In Cyprus ESI was 83.2 in August and EEI at 95.9 while in September ESI declined to 81.4 and EEI increased to 101.5.

In Greece both ESI (90.7 in August) and EEI (105.6 in August) declined to 89.5 and 105.3 in September.

According to DGECFIN, while similarly losing steam, also the recovery of the Employment Expectations Indicator (EEI) continued for the fifth month in a row (up by 2.3 points to 91.8 in the euro area and by 2.4 points to 91.8 in the EU).

In the euro area, the ESI’s continued recovery was driven by further waning pessimism in industry, retail trade, construction and, in particular, services.

To a lesser extent, confidence also improved among consumers.

From a country perspective, the ESI continued to recover in all the largest euro-area economies, namely in Italy (+8.4), France (+5.8), the Netherlands (+2.1), Spain (+1.6) and Germany (+1.2).

All in all, in these countries, between 55% (Spain) and 80% (Germany) of confidence losses suffered during the lockdown were recovered.

Industry confidence continued to catch up with its pre-crisis level (1.7), driven by improvements in managers’ appraisals of the adequacy of stocks of finished products and the current level of overall order books.

Managers’ production expectations, which had recovered to beyond their pre-crisis level already in July, barely moved since then.

Services confidence registered another marked increase (+6.1), thanks to managers’ much less negative views on the past business situation and past demand.

By contrast, their demand expectations waned for the second month in a row.

Despite the continued recovery, services confidence remains far below its February level.

The slight improvement in consumer confidence (0.8) resulted from a marked pick-up in expectations about the general economic situation and a small improvement in households’ views on their financial conditions over the next 12 months.

At the same time, consumers’ assessment of their households’ past financial conditions deteriorated to a new low.

Consumer intentions to make major purchases remained broadly stable and markedly below their pre-crisis level.

The continued but slowing recovery in retail trade confidence (1.8) resulted from retailers’ more benign views on the past business situation and the adequacy of the volume of stocks, which were however partly offset by a renewed setback in managers’ expectations of their business situation over the next three months.

The increase in construction confidence (2.2) resulted from an important improvement in managers’ employment expectations and a slight improvement in their assessment of the level of order books.

Finally, financial services confidence (not included in the ESI) booked another solid increase (11.5), reverting some 90% of the confidence crunch experienced between February and April.

The surge was driven by all of the indicator’s components, i.e. assessments of the past business situation and past demand, and managers’ demand expectations.

The continued, yet decelerating, recovery of the Employment Expectations Indicator (2.3) reflects further improving employment plans in all four business sectors (i.e. industry, services, retail trade, and construction).

Also consumers’ unemployment expectations, which are not included in the EEI, got less pessimistic.

Finally, selling price expectations increased markedly in industry, retail trade and construction, while remaining broadly stable in services.

Consumer price expectations continued to decline significantly.


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