Consumer and Business Confidence Rose Across Europe in August

Douglas A. McIntyre

One more sign appeared that Europe is slowly recovering from its years-long recession, one that outlasted the one in the United States by nearly three years. There already have been data on improved manufacturing, and a tiny improvement in the jobless rate, although unemployment has stayed at levels that will hamper a regionwide recovery long term. The latest evidence that Europe has started to turn around is confidence among consumers and businesses, in particular in August.

According to Eurostat:

In August the Economic Sentiment Indicator (ESI) increased sharply by 2.7 points in the euro area (to 95.2) and 3.1 points in the EU (to 98.1). The indicator rose for the fourth successive month in both regions, marking a two-year high in the EU.


In the euro area, the strong increase resulted from pronounced improvements in confidence among consumers and managers in industry, services and retail trade. Only in the construction sector confidence weakened. Economic sentiment improved in fourteen euro area countries and in all of its five largest economies, i.e. the Netherlands (+5.2), Germany (+3.3), Italy (+2.0), France (+1.6) and Spain (+0.8).

The fact that Spain and France are in the plus column at all are a signal that even the weak economies have started to emerge from the fog.

Of course, one month does not makes a trend, as the two steps forward, one step back recovery in the U.S. has demonstrated. To support a case for a recovery in Europe, the trend would have to extend for many months.

Finally, more detail from the Eurostat data:

Industry confidence increased significantly (+2.7) fuelled by managers' much more positive assessment of the current level of overall order books and production expectations. Their assessment of the stocks of finished products improved too. Also companies' assessments of past production and the current level of export order books, which are not included in the confidence indicator, were much more favourable. Services confidence saw a significant increase as well (+2.5), resulting from a sharp rise in managers' assessment of the past business situation and important improvements concerning past demand and demand expectations. Consumer confidence continued its upward trend that started in December 2012. Its marked improvement (+1.8) was mainly thanks to more optimistic views on the future general economic situation. Consumers' opinions on the future financial situation of their households and on their savings over the next 12 months also brightened, while their unemployment expectations remained unchanged. Also retail trade confidence increased substantially (+3.3). Managers were particularly more confident about the future business situation. Also their assessments of the present business situation and their volume of stocks improved markedly. By contrast, the construction sector registered a decrease in confidence (‑0.9), resulting from managers' worsened assessment of both order books and employment expectations. Financial services confidence (not included in the ESI) increased sharply by 3.5 points, driven by a striking increase in managers' demand expectations. While managers' assessment of past demand improved slightly, their views on the past business situation deteriorated somewhat.