In November, the Economic Sentiment Indicator (ESI) declined considerably in the EU and the Eurozone. This came after another sharp decline in sentiment observed in the October survey. It fell by 6.7 points in the EU and by 5.1 points in the Eurozone, to 70.5 and 74.9, respectively. The ESI for the EU stands at its lowest since January 1985, while that for the Eurozone is at the lowest since August 1993.

In both the EU and the Eurozone, the decline in the overall ESI reflects a general decrease in sentiment. The industrial confidence indicator fell significantly again in both regions. The services confidence indicator marks a new record-low level for both regions since the introduction of the survey twelve years ago. Consumer confidence declined only marginally, but remains at very low levels compared to its average value. Sentiment in the retail sector declined further in the EU, but remained the same in the Eurozone, while the construction confidence indicator dropped markedly – by 4 points in both regions.

Reflecting the widespread deterioration in economic sentiment, all EU countries reported weakening sentiment. Among the large Member States, confidence in the UK fell the most (-8.8 points), followed by Poland (-7), Germany (-6.3) and the Netherlands (-5.4). The confidence indicator fell less significantly in France (-1.3), Italy (-1.2) and Spain (-2.8); however the latter now stands at its lowest ever.

The financial services confidence indicator – not included in the ESI – reported another substantial fall in both regions this month. Last month, it turned negative for the first time since the survey was launched in 2006. The majority of managers interviewed expect demand for their financial services to decline in the next three months after they reported worsening demand over the past three months.

According to the six-monthly industrial investment survey, which was carried out in October and November of this year, managers in most Member States expect to decrease their investment volumes in 2009 compared to 2008. More specifically, in 2009 real investment is expected to drop by 5% in both the EU and the Eurozone. In the same survey, managers estimated that real investment grew by 3% (EU) and 4% (Eurozone) in 2008 compared to 2007, lower than foreseen in spring 2008.

Business Climate Indicator for the euro area decreases further in November

The Business Climate Indicator (BCI) for the euro area fell more markedly this month than last, and now stands close to values last observed in 1993. The continued steep decline of the indicator signals a deteriorating trend in year-on-year industrial production growth, which is likely to continue to be negative even in the fourth quarter. All five underlying components of the BCI deteriorated. Managers reported a sharp fall in the production trend observed in recent months while stocks of finished goods increased. Their assessment of the current overall order book and export order book is increasingly negative. Looking ahead, production expectations in the euro area worsened notably compared to last month.

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