Recovery of euro area economic sentiment continues – European Commission

According to the report from European Commission, following the historical slump in March and April, the recovery of the Economic Sentiment Indicator (ESI) continued in August 2020. Registering marked increases in the euro area (+5.3 points up to 87.7) and the EU (+5.0 points up to 86.9), the ESI in both regions has so far recovered around 60% the combined losses of March and April. Also the Employment Expectations Indicator (EEI) improved for the fourth month in a row (by 2.9 points to 89.6 in the euro area and by 2.7 points to 89.5 in the EU).

In the euro area, the ESI’s recovery resulted from a sustained improvement of industry, retail trade, and, in particular, services confidence. By contrast, confidence edged down in construction and remained broadly stable among consumers

Industry confidence continued to recover (+3.5), fuelled by more sanguine appraisals of the stocks of finished products and the current level of overall order books. The third sharp increase in a row in services confidence (+9.0) was driven by managers' improved assessment of both the business situation and demand over the last 3 months, while their demand expectations slipped for the first time in four months. Virtually unchanged consumer confidence (+0.3) reflects households’ broadly stable intentions to make major purchases and expectations concerning their financial conditions. By contrast, households’ assessment of the future general economic situation and of their financial conditions over the last 12 months improved slightly. 

The increase of the Employment Expectations Indicator (+2.9) reflects significantly improved employment plans in retail trade, industry, and services, which were only partly diminished by worsened employment plans in construction. Although not included in the EEI, consumers’ unemployment expectations remained broadly unchanged.