EU Economic Sentiment Indicator May 2008

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After a drop in April, the Business Climate Indicator (BCI) has stabilised in May. The Economic Sentiment Indicator (ESI) remained unchanged in the Eurozone at 97.1.



The downward trend of the BCI and the deceleration in industrial production registered in March point to a weakening of industrial activity in the second quarter of 2008.

The increase in the BCI is mainly due to an improvement in industry managers' appraisals of the production trend in recent months. Managers' assessments of their export order books deteriorated slightly, while their production expectations and their views on total order books and stocks of finished products remained unchanged.

Economic sentiment decreases further in the EU and remains stable in the Eurozone

In May, the Economic Sentiment Indicator (ESI) decreased further by 1.3 points to 96.7 in the EU and remained unchanged in the Eurozone at 97.1. In both regions, the ESI stands below its long-term average.

There is also increasing evidence of a widening divergence between the big four economies in the 15-nation currency bloc with Germany and France continuing to prop-up a contracting Italy and a Spain which is in "free fall". This divergence is only going to add to the headaches over at the European Central Bank, which is already pretty worried about the continuing high inflation.




The decrease in the sentiment indicator for the EU is due to lower confidence in manufacturing and construction and among consumers, while confidence in retail trade improved and remained stable in services. In the Eurozone, sectoral developments were somewhat different, with confidence remaining stable in manufacturing, decreasing among consumers and improving in services, retail trade and construction.





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