The Economic Sentiment Indicator (ESI) declined in both the EU and the Eurozone in July, while remaining at high levels. It decreased by 1.7 points in the EU and by 0.7 of a point in the Eurozone, to 113.3 and 111.0 respectively.

Economic sentiment indicator (s.a.)
EU: July 113.3

Eurozone: July 111.0

The decline of economic sentiment in the EU was mainly due to a decrease in confidence in the industry, services and construction sectors. Confidence in the retail trade sector and among consumers remained unchanged. In the Eurozone, sectoral developments were somewhat different: unlike in the EU, confidence improved in the retail trade sector, while it remained stable in the services sector.

At the individual country level, the picture is mixed, though a majority of countries reported decreases in sentiment. Among the large Member States, confidence improved in France (+0.7) and Poland (+0.6), while it decreased in Germany (-0.6), Spain (-0.9), Italy (-1.0) and the UK (-6.6).

After a slight increase in June, the Business Climate Indicator (BCI) for the Eurozone decreased in July, while remaining at high levels. This sustained high level suggests that economic activity in the industry sector is expected to remain firm in the coming months, notwithstanding the deceleration of industrial production growth in April and May 2007.

The decline of the BCI in July is the effect of minor but converging changes in its five underlying components. Industry managers' assessment of their stocks of finished products, production trend observed in recent months, production expectations for the months ahead, total order books and export order books all deteriorated somewhat.

The BCI is based on a factor analysis of the Eurozone aggregate balances (seasonally adjusted) of five of the monthly questions in the industry survey (only employment and selling-price expectations are excluded).