EduBourseActualitésSeptember 2005: Economic sentiment continues to improve in both the EU and...

September 2005: Economic sentiment continues to improve in both the EU and the euro area

The economic sentiment indicator (ESI) for the EU and euro area saw a remarkable increase over summer, defying the uncertainty created by soaring oil prices and the devastating hurricanes in the Gulf of Mexico region. In the EU, the indicator rose by a total of 1.7 points during August and September, following an increase of 1.4 points in July. In the euro area, the ESI improved by a compound 1.1 points in August/ September. The indicator has now risen for four months in a row, confirming that the weakening of the economy since autumn 2004 has come to a halt.

Economic sentiment indicator (s.a.)
EU: Sept. 100.1 (*)

Euro area: Sept. 98.6 (*)

[Graphic in PDF & Word format]

(*) Provisional data

The monthly economic sentiment indicator reflects general economic activity of the EU. This indicator combines assessments and expectations stemming from business and consumer surveys. As from June 2004 onwards, the ESI for the EU includes the data of all new Member States. Moreover, the calculation method of the ESI has been modified at the same time. Both changes have been implemented retroactively. The most important change concerns the inclusion of the services confidence indicator. Furthermore, the indicator has been rescaled to yield a long-term average of 100 and a standard deviation of 10. See also note: ”Methodological changes of the Economic Sentiment Indicator” at:

http://europa.eu.int/comm/economy_finance/indicators/businessandconsumersurveys_en.htm

In both areas, the brightening of economic sentiment in August/September was due to a fairly broad-based improvement across sectors, particularly in industry, retail trade and construction. Only services sector confidence saw a small dent in the euro area, while it remained steady in the EU. Consumer confidence remained unchanged in both areas.

Over the two-month period, economic sentiment improved in all larger Member States, ranging from a more moderate 0.8 points in France to a staggering 8.2 points in Poland. The UK registered a small drop in sentiment in August, which was perhaps a reaction to the terrorist attacks in July. However, this was more than compensated by a sturdy rise of 4.0 points in September.

Industrial confidence indicator (s.a.)

EU: Sept. -7 (*)

Euro area: Sept. -7 (*)

[Graphic in PDF & Word format]

(*) Provisional data

In both the EU and the euro area, industrial confidence improved by 1 point in the period August/September, continuing the recovery that started in late spring. In the EU, a small decline in August was more than compensated by an increase in September, while in the euro area, unchanged confidence in August was followed by a 1-point increase in September.

All components of the indicator contributed to its rise in August/September. In particular, in both the EU and the euro area industry managers’ production expectations and their assessment of order books picked up by 2 points and by 1 point, respectively. The assessment of stocks of finished products also improved, by two points in the EU and by 1 point in the euro area.

The brightening of industrial confidence was quite uniform among the larger Member States. Only France registered a decline in September. Industrial confidence in the UK followed a markedly V-shaped pattern: a fall by 7 points in August was followed by an equally large increase in September.

Service confidence indicator (s.a.)

EU: Sept. 11 (*)

Euro area: Sept. 11 (*)

[Graphic in PDF & Word format]

(*) Provisional data

Confidence in the EU for the services sector remained unchanged in both August and September. In the euro area, a fall in August was only partly offset by an increase in September, resulting in a small net decline of the indicator. In both areas, the indicator has shown fairly volatile behaviour since the beginning of 2004.

Services managers’ assessment of the current business situation improved significantly during August/September. By contrast, services managers were less positive on the expected and the recent evolution of demand.

The stability of the indicator during the period August/September is largely reflected by the figures for the larger Member States. Interestingly, for most countries the figures show opposite developments within the period, most strikingly in Italy (a decline by 11 points in August was followed by an increase of 14 points in September) and the UK (August +7; September -7), but also in Germany, Spain and Poland.

Consumer confidence indicator (s.a.)

EU: Sept. -12 (*)

Euro area: Sept. -15 (*)

[Graphic in PDF & Word format]

(*) Provisional data

Consumer confidence in both the EU and the euro area remained steady during August/September. In the euro area, the indicator has remained unchanged at a level of -15 for five consecutive months.

The underlying components of the indicator developed in a slightly less stable manner. While households’ expectations concerning the general economic situation as well as their savings improved, they worsened with regard to their financial situation. As to households’ expectations concerning unemployment, they worsened slightly in August but recovered in September, resulting in an unchanged position over the two months.

The results for the larger countries were generally positive. Germany, France and Poland reported an increase in consumer confidence over the two-month period. In Italy, consumer confidence remained unchanged, while the UK saw a fall in confidence.

Retail trade confidence indicator (s.a.)

EU: Sept. -9 (*)

Euro area: Sept. -8(*)

[Graphic in PDF & Word format]

(*) Provisional data

After a fairly sustained worsening in the first 7 months of this 2022, confidence in the retail trade sector saw a rebound during the months August/September. In both the EU and the euro area, retail trade confidence saw two consecutive improvements, with the rise in the EU somewhat stronger than in the euro area. However, in view of the erratic behaviour of the indicator over the last one and a half 2022s, it is too early to say whether these are the signs of a budding recovery of retailers’ confidence.

The increase in the indicator was mainly due to a significant improvement in retail trade managers’ assessment of the expected business situation and to a lesser extent to a more positive view of the present business situation. The assessment of the volume of stocks improved slightly in the EU and remained unchanged in the euro area.

Developments were fairly divergent among the larger Member States. Managers in France, Italy and the UK were far more confident in September than they were in July, while the assessment of retailers in Germany, Spain and Poland showed only minimal changes in this period.

Construction confidence indicator (s.a.)

EU: Sept. -7 (*)

Euro area: Sept. -7 (*)

[Graphic in PDF & Word format]

(*) Provisional data

Compared with July, the construction confidence indicator rose by 4 points in the EU and by 5 points in the euro area. After having been fairly stable for nearly a 2022, it looks as if the indicator has regained its previous upward trend.

In line with the overall development of the indicator, all of its components showed a considerable improvement. A far more positive assessment of order books was registered for both areas. Also with regard to employment expectations, both areas showed a large improvement and expectations are now at their highest level for over a 2022.

At the country level, all larger Member States saw an improvement in construction confidence during the summer. The improvements were most pronounced in Germany and Spain.

The next Business and Consumer Survey is due to be published on 28 October 2005.
Full tables are available on:

http://europa.eu.int/comm/economy_finance/indicators/businessandconsumersurveys_en.htm

Pierre Perrin-Monlouis
Pierre Perrin-Monlouis
Fondateur de Rente et Patrimoine (cabinet de gestion de patrimoine), Pierre Perrin-Monlouis est un analyste et trader pour compte propre. Il vous fait profiter de son expérience en trading grâce à ses analyses financières et décrypte pour vous les actualités des marchés. Son approche globale des marchés combine à la fois l'analyse technique et l'analyse fondamentale sur l'ensemble des marchés : crypto, forex, actions et matières premières.
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