The Eurozone Business Climate Indicator and the Economic Sentiment Indicator both rose for seventh consecutive month in October.

Business Climate Indicator continues to recover

The Business Climate Indicator (BCI) for the Eurozone improved further in October, registering its seventh consecutive increase. The level of the BCI, however, continues to remain very low, suggesting that year-on-year growth in industrial production was still negative in September.

The significant rise in the BCI reflects an across-the-board improvement in managers' assessments: production expectations, the perception of the production trend observed in recent months, order books and export order books all went up markedly. Furthermore, managers viewed stocks of finished goods to be closer to appropriate levels, bringing the current reading to just below its long term average.

Economic Sentiment Indicator (ESI) continues its upward march

Rising to 86.0 (+3.4 points) in the EU and to 86.2 (+3.4) in the Eurozone, its improvement in October is the seventh consecutive increase in both series since the trough of March 2009.

These levels, however, are still well below the respective long-term averages.

The Industry sentiment, which rose by 4 points in the EU and by 3 points in the Eurozone, was the largest contributor to the overall improvement in both areas. While the respondents are clearly more positive in their appraisal of order books and the level of stocks, it was the much more optimistic production expectations that really lifted sentiment.

The quarterly manufacturing survey confirms this positive development. Firms are utilising their capacity at a slightly higher pace than in the summer (the reading now stands at 71.4% in the EU and 70.7% in the Eurozone), although utilisation rates are still far below their respective averages. 

The survey participants reported significant improvement in new orders received in the past three months, and more favourable expectations about export orders in the next three months.

Improvements by Member State

The majority of Member States registered an improvement. Among the largest Member States, Italy (+3.8), Germany (+3.4), the UK (+3.2) and France (+3.0) posted significant increases in sentiment, while the rise was more moderate in Poland (+2.3.), Spain (+1.9) and in the Netherlands (+1.1).

Confidence by sector

Confidence among consumers also improved, by 2 points in the EU and by 1 point in the Eurozone, mainly driven by more optimistic general economic outlook. 

Confidence in services increased by 2 points in the Eurozone, while it remained unchanged in the EU, mainly due to falling confidence in the UK. 

Construction continued to rise at a steady pace (+1 for both sectors in the EU and the Eurozone). 

Retail Trade remained unchanged in the Eurozone but declined by 1 point in the EU. 

Confidence in financial services - - not included in the ESI - - stabilised in both regions after the strong increase recorded in September, reflecting a slight improvement in the business situation, while expectations of demand decreased marginally.