The Strategist

Eurozone economic sentiments fall below expectations in August

09/01/2023 - 03:22

The Economic Sentiment Indicator (ESI) in the euro area dropped below forecasts in August, reaching its lowest level since November 2020 (93.3 points as opposed to a projection of 93.7 and a value of 94.5 in July).

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The ESI for EU nations decreased from 93.5 to 92.9 points from one month earlier. The indictor includes data from surveys of businesses in the industrial, services, retail, construction, and consumer sectors. The average value from 2000 to 2022 was 100 points; indications over this mark show rising business activity, while those below it show declining business activity. The tightening of ECB policy and the continued high inflation were two factors that contributed to the drop.

The indicator is declining further in the key European economies: in France, it dropped to 91.4 points from 93.9 points in July, while in Germany, it dropped to 88.6 points from 91. Indicators for business sentiment increased in Poland (ESI was 95.5 points after 94.3 points one month earlier) and Spain (100.9 points in July to 102.4 points in August).

The Employment Expectations Indicator (EEI) continued to fall in August. According to the European Commission, the industries with the most dismal anticipated employment figures were services, construction, and retail trade, while industries with the most positive projections were industrial.

Similar emotions were seen in the industrial sector, according to earlier S&P Global statistics. Even though the PMI slightly increased in August to 43.7 points from 42.7 in July, the equivalent PMI index is still in the negative territory (below 50 points), therefore there is no discussion about the expansion of business activity.