The European Commission’s Economic Sentiment Indicator for August rose to 98.3 from 97.1 in July, thereby approaching the long-term average of 100. Businesses and consumers in the euro area are thus taking an increasingly positive view of the future outlook, which, among other things, gave a boost to investment and household demand, despite ongoing uncertainty surrounding the war in Iran.
The European Commission’s Economic Sentiment Indicator and Employment Expectations continued to rise in both the EU and the euro area in August. The Economic Sentiment Indicator (ESI) rose from 97.2 to 98.2 in the EU and from 97.1 to 98.4 in the euro area. The Employment Expectations Indicator (EEI) also increased compared with July (up +1.2 to 99.0 in the EU and +1.5 to 98.9 in the euro area), meaning that both indices are now close to their long-term averages of 100.
The increase in the ESI (Economic Sentiment Indicator) was driven by higher confidence in manufacturing, services, and retail, while confidence in the construction sector and among consumers remained largely stable. Among the largest EU economies, the ESI improved in France (+2.3), Germany (+1.3), and Italy (+0.8); it remained largely stable in the Netherlands (-0.1) and declined in Poland (-0.5) and Spain (-2.2).
Confidence in the manufacturing sector rose slightly in August (+0.4), as companies reported stronger production expectations and lower inventory levels of finished goods, which was partially offset by a more negative view of current order books.
Confidence in the service sector rose even further (+1.1), which can be attributed, among other things, to more positive expectations regarding future demand and the assessment of past demand. Consumer confidence remained largely stable (+0.1).
Consumers became slightly less pessimistic about their own household’s future financial situation and their past financial situation. Retail confidence rose by +0.7, as retailers’ business expectations for the next three months have improved significantly. Retailers’ view of inventory levels remained largely stable. Confidence in the construction sector remained largely unchanged (-0.2), as construction companies’ improved assessment of order book levels was offset by weaker employment expectations.
ESI (Economic Sentiment Indicator) is a weighted index that reflects how businesses and consumers view the economic situation. It is based on monthly surveys in five sectors: manufacturing (40 %), the service sector (30 %), the consumer sector (20 %), retail (5 %), and the construction sector (5 %).
EEI (Employment Expectations Indicator) focuses specifically on the labor market and summarizes managers' expectations regarding workforce trends in the coming months, and combines data from the manufacturing, services, retail, and construction sectors.
