European Commission Economic Sentiment Indicator, May 2023:  The European Commission (EC) draws from a range of surveys to construct confidence indicators for five sectors of the economy and then uses these to calculate up its Economic Sentiment Indicator (ESI) which is converted to an index based on the long-run average.

The latest report (dated May*) showed another fall in the ESI for both the EU and the Euro-zone – the latter had a larger reduction but this just closed the gap between the two series and the Euro-zone ESI remains a little higher than that for the EU.  The ESI has been below the long-run average (this is the base figure for this series) since the middle of 2022 and, thanks to a rally towards the end of last year, the current ESI is above the low point that was reached in October 2022.

The latest fall in the ESI came because of a decline in confidence for industry, services and, most notably, retail trade;  consumer confidence continues to recover and the construction sector was broadly unchanged from the April* value.

Industrial confidence is calculated based on three questions and it fell for the 4th month in a row as expectations for output over the coming three months and the assessments of total order books both deteriorated and stocks of finished products were increasingly said to be too large/above normal.

There are two other questions which are noted but not used in calculating confidence;  reports of output over the previous three months had been holding up well but in the latest reading this fell at the sharpest rate since the outbreak of the pandemic, while export order books also fell sharply.

Looking at the trends by country reveals a range of outcomes;  Spain, Germany and Italy all had a large fall in their ESI in May* and the Netherlands had a more modest but still significant reduction – on the other hand, there was a reasonable increase in both Poland and France.

Because the ESI is calculated against a base set by the long-run average reading we can judge countries by which side of this base figure they lie – most currently have an ESI reading below 100.  The exceptions are Bulgaria, Croatia, Cyprus, Greece, Italy, Malta and Spain, with Portugal and Romania both falling below the base level this month;  the EU candidate countries also participate in this survey and Albania, Montenegro and Turkey also have an ESI reading above their long-run average.

*  Note that although dated May, the data collection period was from 1st to 22nd of that month, so the trends really refer to April and the 3-month periods around this month.

You can download the EC report and statistical annex from their web-site at or you can request it from MTA.


UK Profitability, 4th Quarter 2022:  The Office for National Statistics (ONS) has now published the profitability data for the 4th quarter of 2022, although in the absence, for the time being, of the industry breakdown of the investment data, it is of less interest than usual.

The net rate of return for manufacturing companies edged up to 8.4% from a revised figure of 8.3% in Q3-22;  however, it is slightly lower than the 8.5% recorded in the final quarter of 2021.  There was a spike in this series in Q3-20 when manufacturing companies profitability reached 10.7%, but apart from this, there has been a downward trend from the start of 2018.

For manufacturing, the net rate of return is calculated as the net gain as a percentage of the capital used in production.  “Capital consumed” refers to the decline in the current value of the stock of fixed assets while the operating surplus is calculated from trading profits plus income from rental of buildings, less changes in inventory value caused by price changes.

This slight improvement, albeit not a significant one, came from the net operating surplus figure growing by a larger proportion than net capital employed.

You can download the ONS Statistical Bulletin and the investment data files from their website at (30 May) or request if from MTA.

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