EU Economy
Both Eurozone business climate and economic sentiment indicators rose slightly in February
By Finfacts Team
Feb 27, 2014 - 2:54 PM

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Both the Eurozone Business Climate Indicator and Economic sentiment indicator rose slightly in February according to the European Commission today.

Business Climate: In February 2014 the Business Climate Indicator (BCI) for the Eurozone increased slightly by 0.12 points to +0.37. Managers' appraisal of the past production, the stocks of finished products as well as the current level of overall order books and export order books marked an improvement; production expectations were virtually 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: In the Eurozone, the  Economic Sentiment Indicator's (ESI) marginal increase was due to enhanced confidence in construction and, to a lesser extent, services, retail trade and industry; at the same time, confidence among consumers worsened. Sentiment booked improvements in three out of the five largest Eurozone economies, i.e. Germany (+0.4), the Netherlands (+0.6) and, especially, Italy (+2.4), while it remained stable in Spain and deteriorated in France (‑1.4).

Industry confidence registered a small improvement (+0.4), backed by managers' slightly more optimistic assessment of the stocks of finished products and the current level of overall order books; their production expectations were virtually unchanged. Managers' assessments of the past production and the current level of export order books, which are not included in the confidence indicator, marked an improvement. The increase in services confidence (+0.8) resulted from managers' more positive assessment of past demand and the past business situation, while their appraisal of expected demand remained broadly stable. Consumer confidence deteriorated (-1.0) as a result of worsened expectations about savings, unemployment and the future general economic situation.

Consumers' views on the future financial situation of their households remained broadly flat. Retail trade confidence booked a moderate improvement (+0.5) driven by managers' more positive evaluation of the present business situation, partially offset by less positive business expectations; managers' appraisal of the volume of stocks remained broadly unchanged. Confidence in the construction sector went up (+1.3), resulting from managers' markedly improved assessment of order books coupled with a downward revision of employment expectations. Financial services confidence (not included in the ESI) decreased by 2.5 points. While the assessment of the past business situation and past demand worsened, demand expectations were assessed more positively.

While employment plans were revised upwards in services, they remained virtually unchanged in industry and worsened in retail trade and construction. Selling price expectations rose in services and construction but decreased in retail trade and industry. Also consumers' price expectations were revised downward.

EU developments

As in the Eurozone, the headline indicator for the wider EU was broadly unchanged (+0.2). Concerning the two largest non-Eurozone EU economies, the ESI improved in the UK (+1.0) and remained broadly stable in Poland (+0.3).

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