The Economic Sentiment Index (ESI) compiled by the European Commission fell sharply for both the EU and the Euro-zone in the report covering December. This was driven by a fall in confidence for industry, consumers and construction that was only partly offset by an improvement in the service sector.
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 its Economic Sentiment Indicator (ESI) which is converted to an index based on the long-run average. Although dated December, the data collection period was from 1st to 20th of that month so the trends really refer to November and the 3-month periods of September to November and December 2024 to February 2025.
Following a period of relative stability, albeit below the long-run average since early 2022, there was a significant fall in the latest report, taking the ESI to its lowest level for the year. As noted above, confidence in the industry, consumer and construction sectors fell, it was broadly stable for the retail trade and improved modestly for the service sector.
The calculation of confidence for the industry sector is based on three questions – the current level of order books, production expectations for the coming three months and stocks of finished products – and all three showed a sharp decline in this report. There are two other questions which are not included in the calculation of confidence for the industry sector and while reports on output over the previous 3 months also fell, there was a slight improvement in the assessment of export order books but from a low level.
Among the larger EU economies, the ESI fell sharply for France, Germany and, to a lesser extent, Italy, was broadly stable in the Netherlands and Poland and improved in Spain.
The ESI is calculated against the long-run average, so we can look at the position of the individual countries against their own historical situation as this is the best way to compare between countries. In the latest report, 12 EU Member States have an ESI above 100; they are Bulgaria, Croatia, Cyprus, Denmark, Greece, Lithuania, the Netherlands, Portugal, Romania, Slovakia (new to the list this month) Spain and Sweden – Malta dropped back sharply this month and is now below the threshold. The EU candidate countries also participate in this survey and Albania, Montenegro, North Macedonia and Serbia also have an ESI reading above their long-run average, with only Turkiye missing from this group.
You can download the EC report and statistical annex from their website at https://economy-finance.ec.europa.eu/economic-forecast-and-surveys/business-and-consumer-surveys/download-business-and-consumer-survey-data/press-releases_en (open the 2024 box) or you can request it from MTA.