The European Commission said today that after a fall below its long-term average in July, the Business Climate Indicator (BCI) for the Eurozone decreased again in August. The low level of the indicator suggests that industrial activity remains subdued. The Economic Sentiment Indicator (ESI) fell in both the Eurozone and EU.
Four out of five underlying components of the BCI declined. Industrial managers' production expectations deteriorated most, but their assessment of stocks of finished products, total order books, and export order books also declined. Their assessment of production trend observed in recent months was the only component to improve.
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 decline in both the EU and the Eurozone
In August, the Economic Sentiment Indicator (ESI) declined further in both the EU and the Eurozone. It fell by 1.9 points in the EU and by 0.7 of a point in the Eurozone, to 86.9 and 88.8 respectively. In the EU, the ESI reached its lowest level since December 1993.
The overall decrease in sentiment in the EU was characterised by a fall in all business sectors, whereas only consumer confidence improved slightly. Both industrial confidence and construction confidence fell below their respective long-term averages. In the Eurozone, the fall in overall sentiment was caused by lower confidence in industry and retail trade, while the other three components improved. Consumer confidence rose in both areas for the first time after a continuous decline throughout the year.
In August a majority of countries reported a fall in sentiment. Among the large Member States, the UK, Spain, and Germany registered drops in sentiment (-5.2, -3.2, and -2.6 respectively), while it remained stable in Poland. Following significant declines in July, the indicators for Italy and the Netherlands recovered (+4.1 and +1.7 respectively); for the Netherlands, the recovery brought the indicator above its long-term average.
