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European Commission Economic Sentiment Indicator and Industrial Investment Survey, November 2021:  The European Commission (EC) draws from a range of surveys to construct confidence indicators for six sectors of the economy and then uses five of these (financial services is not included in the ESI) to compile its Economic Sentiment Indicator (ESI).  Because of the data collection periods, the reference month (November) is that of publication but the data really refers to the previous month (October in this case).

In November, the ESI reversed the gains we saw in the previous survey but it remains at an historically very high level in both the Euro-zone and the EU.  There was, however, an increase in the employment expectation indicator, driven by services, retail trade and construction, with industry broadly flat.

The fall in the ESI was down to a significant weakening of consumer confidence;  it was broadly unchanged in industry and services, with an improvement for retail trade and construction - financial services confidence also improved.

Among the largest economies in the EU, there was a significant improvement in the ESI in France, with more modest improvements in Italy and Poland;  confidence worsened quite sharply in Spain, the Netherlands and Germany.  However, most EU countries have an ESI reading that is well above their respective long-run averages (since 2000) and only Bulgaria, Czech Republic, Latvia, Romania and Slovakia are below this level.

Confidence in the industry sector in the EU was unchanged from the previous month when it had recorded its 2nd highest ever level (behind only July 2021).  There was an improvement in the survey respondents’ assessment of both expectations about output in the coming 3 months and total order books but this was balanced by an uptick in the assessment of stocks of finished products - as with the PMI data, this is a distortion in the current circumstances where there is a shortage of components and improved stocks should be a positive.  Although not part of the calculation, the report notes that there was a significant fall in output over the past 3 months (probably driven by those supply chain problems) but that export order books improved strongly.

The EC’s new uncertainty index rose again in the latest report with all of the elements seeing an increase compared to the previous month.  Along with retail trade (affected by various lockdowns), industry has the highest level of uncertainty as a result of the various supply chain problems.

Twice per year, the EC includes an industrial investment survey in this set of results.  The methodology of this survey has changed and they now report the percentage balances for investment intentions (up, same or down) covering two years in each survey;  this time, the comparisons are 2021 over 2020 and the outlook for 2022 compared to this year (2021).

Compared to the Spring survey, there has been a small upgrading of the expectations for investment in 2021 in the EU but it is broadly unchanged for the Euro-zone.  This is the first assessment of the prospects for 2022 and they are positive and at a higher level than for 2021 in both the EU and Euro-zone.  For 2021, most countries have positive balances suggesting that investment will be higher than in 2020 – the exceptions are Spain, Malta, Poland and Romania.  All the countries have positive balances for 2022.

You can download the EC press release and statistical appendix from their web-site at or it can be requested from MTA.


Profitability of UK Companies, 2nd Quarter 2021:  Data published by the ONS this morning showed an improvement in the profitability of manufacturing companies (defined as the net operating surplus divided by net capital employed) in the 2nd quarter of the year;  this now stands at 10.1%.  This compares with 9.9% in the first quarter of this year and 7.6% a year ago.

This is broadly in line with the steady recovery that has taken place since the low point in the 2nd quarter of 2020, although there was a spike in Q3-2020 which disrupts this otherwise steady improvement.  It also ties-in with the recovery in investment spending for both the engineering industries and the broader measure for manufacturing as a whole.

This recovery in profitability bodes well for companies being able to use the super-deduction allowance to boost their investment spending over the next 18 months - note that the super-deduction does not apply to leased assets, hence the importance of the profitability of individual companies which can be off-set against investment for tax calculations.

You can download the ONS data tables (note that the ONS no longer publishes any commentary of this dataset) from their web-site at (03 December) or request a copy from MTA.