July 2014: Economic Sentiment stable in the euro area, decreasing slightly in the EU

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In July the Economic Sentiment Indicator (ESI) remained broadly stable in the euro area (+0.1 points at 102.2),1 while it decreased slightly in the EU (by 0.6 points to 105.8).

Economic sentiment indicator (s.a.)

July EU: 105.8 – Euro Area: 102.2

Euro area developments

The virtually flat euro area outcome perpetuates the sideways movement observed in recent months. It resulted from confidence improvements in industry and construction which were offset by decreases in services, retail trade and among consumers. Amongst the largest euro area economies, the ESI eased in Germany (-0.5) and Spain (‑0.6), while it increased in the Netherlands (+0.4), France (+0.5) and Italy (+1.6).

The rise in industry confidence (+0.5) resulted from managers' more optimistic views on expected production and, to a lesser extent, the current level of overall order books, while their assessment of stocks of finished products remained broadly unchanged. Of the questions not included in the confidence indicator, the assessment of past production worsened, while views on export order books remained stable. The decline in services confidence (‑0.8) was caused by managers' significantly lower demand expectations and more muted assessments of the past business situation which more than outweighed a more positive stance on past demand. Consumer confidence slid (-0.9) owing to markedly more pessimistic assessments of future unemployment and the future general economic situation, which were only partly offset by a moderate improvement in consumers' assessment of their future savings. Views on the expected financial situation remained broadly unchanged. The decline in retail trade confidence (-0.6) reflects more pessimistic views on the expected business situation and the adequacy of the volume of stocks, while managers' assessment of the present business situation remained broadly stable. The rise in construction confidence (+3.5) was fuelled by a marked upward revision of employment expectations and, to a lesser extent, managers' improved assessment of the level of order books. The deterioration (-2.2) in financial services confidence (not included in the ESI) resulted from less positive appraisals of past and expected demand, while managers' assessments of the past business situation remained broadly stable.

Employment plans saw a marked upward revision in construction, while they remained broadly unchanged in industry and decreased significantly in services and, to some extent, retail trade. Selling price expectations remained broadly stable in industry and retail trade while they declined in services and construction. Consumer price expectations remained broadly unchanged compared to June.

EU developments

The headline indicator for the EU decreased slightly (-0.6), owing to worsening sentiment in the two largest non-euro area EU economies, the UK (-3.3) and Poland (-0.9). At the sector level, the worse outcome in EU sentiment was mainly due to virtually unchanged confidence in industry (as opposed to the improvement in the euro area). Apart from this, sector developments were largely in line with those in the euro area. Some differences were observable at question level, notably concerning managers' employment and price expectations: EU managers revised their employment plans upwards across all business sectors and expected to increase selling prices in industry, services and retail trade. Price expectations were unchanged only in construction.

Quarterly survey results (conducted in July)

In the euro area manufacturing sector, the estimated rate of capacity utilisation improved by 0.3 points to 79.8%. Accordingly, the share of managers assessing their current production capacity as 'more than sufficient' (in view of current order books and demand expectations) declined. At the same time, managers' export volume expectations decreased somewhat and managers' assessment of their competitive position on foreign markets outside the EU declined compared with the previous survey carried out in April. Finally, despite managers' markedly worsened appraisal of developments in new orders, the estimated number of months' production assured by orders on hand increased slightly. Developments in the wider EU were slightly more positive, with the rate of capacity utilisation increasing by 0.6 to 80.2 points and export volume expectations improving.

A new data series is available to measure capacity utilisation in the services sector.2 In both the EU and the euro area, capacity utilisation in services was on an upward trend since the beginning of 2013 (see Graph 11). In July 2014, the indicator remained flat in the euro area (at 87.3%) and increased slightly in the EU (by 0.3 points to 87.7%).

Industrial confidence indicator (s.a.)

July EU: -2.5 – Euro Area: -3.8

Service confidence indicator (s.a.)

July EU: 8.9 – Euro Area: 3.6

Consumer confidence indicator (s.a.)

July EU: -5.5 – Euro Area: -8.4

Retail trade confidence indicator (s.a.)

July EU: 2.0 – Euro Area: -2.5

Retail trade confidence indicator (s.a.)

July EU: 2.0 – Euro Area: -2.5

Financial services confidence indicator (n.s.a.)

July EU: 17.1 – Euro Area: 14.

The next Business and Consumer Survey is due to be published on 28 August 2014.

Full tables are available on:


Scheduled publication dates

Flash estimate

Final release EU, euro area and Member States

August 2014

21 August 2014

28 August 2014

September 2014

22 September 2014

29 September 2014

October 2014

23 October 2014

30 October 2014

Contacts :

Simon O'Connor (+32 2 296 73 59)

Vandna Kalia (+32 2 299 58 24)

Audrey Augier (+32 2 297 16 07)

For the public: Europe Direct by phone 00 800 6 7 8 9 10 11 or by e­mail

1 :

The business confidence indices for France were slightly revised compared to the June press release, causing an upward revision of a decimal point for the euro area ESI (to 102.1).

2 :

A new question on capacity utilisation was introduced into the services survey in July 2011. Seasonally adjusted results are now published for the first time. While the question aims to gauge capacity utilisation in the services sector, given the diversity and variety of production processes in services firms, the measurement of capacity utilisation is different from that in manufacturing industries. The services survey asks: “If the demand addressed to your firm expanded, could you increase your volume of activity with your present resources? Yes - No. If so, by how much (in %)?”, i.e. the percentage of increase in the formula below. The capacity utilisation (CU) in per cent is then derived as:

CU (in %)=100/((1+(percentage of increase)/100)).

The formulation assumes that the expansion of demand triggers an expansion of output and that the maximum increase in demand that the services firms could satisfy with their present resources is known. As in the manufacturing survey, the services survey includes the question on capacity utilisation at a three-month frequency (in January, April, July and October each year). Background information and a preliminary analysis of the seasonally unadjusted results until October 2013 are available at http://ec.europa.eu/economy_finance/db_indicators/surveys/method_guides/index_en.htm

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