European
Eurozone Business Climate Indicator and Economic Sentiment Indicator weakened in December 2007
By Finfacts Team
Jan 7, 2008, 12:10

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Following a recovery in November, the Business Climate Indicator (BCI) for the Eurozone decreased in December. The indicator is still at a relatively high level, and in combination with the pick-up in industrial production in October, this suggests that economic activity in the industry sector will continue to grow at a solid pace. The Economic Sentiment Indicator (ESI) continued to weaken in both the EU and the Eurozone.

Data on both indicators was issued today by the European Commission.

The decrease in the BCI is essentially caused by a worsening of industry managers' assessment of the production trend observed in recent months.

To a lesser extent, managers' assessments of their production expectations and total order books also contributed to the decline. The views of stocks of finished products and export order books remained unchanged.

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).

Economic sentiment continues to weaken in both the EU and the Eurozone

In December, the Economic Sentiment Indicator (ESI) continued to weaken in both the EU and the Eurozone. It declined by 0.4 of a point in the EU and by 0.1 of a point in the Eurozone, to 107.1 and 104.7 respectively. However, despite the decline observed in the second half of 2007, the indicator remains well above its long-term average in both areas.

Economic sentiment indicator (s.a.)
EU: December 107.1

Eurozone: December 104.7

In both regions the decline in the ESI is reflected in the indicators for the industry, retail trade, and construction sectors. In addition, consumer confidence declined in the Eurozone, while it remained unchanged in the EU. In both areas, the confidence indicator for the services sector was the only one to improve.

A large majority of countries reported decreases in sentiment in December. Among the large Member States, confidence deteriorated in Germany (-0.3), Spain (-1.2), France (-0.9), Poland (-0.6) and the UK (-1.2). In Italy (+2.3) confidence improved.

Industrial confidence indicator (s.a.)

EU: December 2

Eurozone: December 2

After a recovery in November, the industrial confidence indicator declined in December, decreasing by one point in both the EU and the Eurozone. The level of the indicator remains well above its long-term average.

In the EU, managers' production expectations and their assessment of order books deteriorated, contributing to the overall decline in industrial confidence. Their views on stocks of finished products improved slightly. In the Eurozone, essentially the same trends were observed, except for managers' production expectations, which remained unchanged.

Among the large EU Member States, industrial confidence increased only in Germany (+1), while it weakened in Spain (-2), France (-2), Italy (-1) and the UK (-3). It remained unchanged in Poland for a sixth consecutive month.

Service confidence indicator (s.a.)

EU: December 15

Eurozone: December 14

Following the recent period of declining confidence, the services confidence indicator recovered slightly in both the EU and the Eurozone in December. The indicator still remains below its long-term average in both areas.

In the EU, the increase in the confidence indicator was due to managers’ improved appraisal of the recent evolution of demand, which increased by two points. Their assessments of the other two components of the confidence indicator, the current business situation and demand expectations, remained unchanged. In the Eurozone, both demand components improved, while managers’ assessment of the current business situation deteriorated slightly.

At the country level, a majority of countries reported decreasing sentiment in December, but for a large share of countries the indicator was stable. Among the large Member States, services confidence increased significantly in Italy (+9), although not enough to offset the loss registered in the previous month. Sentiment also improved in the UK (+1), while it decreased in Germany (-1) and France (-2). Confidence remained stable in Spain.