Eurozone Economic Confidence Strongest Since Early 2018

Eurozone economic confidence improved to the strongest level in more than three years in May driven by the easing of Covid related restrictions, survey results from the European Commission showed on Friday.

The economic confidence index rose to 114.5 in May from 110.5 in the previous month. This was the highest score since January 2018, when the reading was 114.7.

Industry confidence increased for the sixth month in a row to reach a new all-time high of 11.5 in May. The improvement was largely underpinned by very positive developments in managers’ assessments of the current level of overall order books.

At 8.8, the services confidence index registered the third significant growth in a row and exceeded its long-term average for the first time since March last year. Managers expressed more positive views on the past business situation and past demand, and were more optimistic on demand expectations.

The consumer sentiment index improved to -5.1 in May, as initially estimated, from -8.1, driven by an improvement in all its components, namely views on their household’s past and future financial situation, their expectations of the general economic situation in their country, and their intentions to make major purchases.

Retail trade confidence rose for the third time in a row, to +0.4 in May, reflecting managers’ improved assessments of the past and expected business situation, while their assessment of the adequacy of the volume of stocks slightly worsened.

The construction confidence index advanced to 4.9 from 3.0 a month ago, as managers posted better appraisals of the level of order books and more optimistic employment expectations.

The business confidence indicator rose moderately to 1.50 in May from 1.12 in April.

The employment expectations indicator climbed 2.9 points to 110.1 in May, bringing it further above its long-term average.

Further, selling price expectations increased markedly for the third month in May with all surveyed sectors reporting gains.

Although the survey also showed that input shortages are causing price pressures to intensify, once these shortages ease, inflation will drop back sharply, Jack Allen-Reynolds, an economist at Capital Economics, said.

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