European Union Services Sentiment Indicator

Services Sentiment Indicator reflects business sentiments in the service sector of the eurozone. The index is calculated monthly based on a survey of the largest service sector companies. The calculation is seasonally adjusted.

The sample size for the eurozone is about 18 thousand companies representing all sectors of the service industry in the eurozone. The number of companies per country is calculated in accordance with the contribution of a particular country to the economy of the euro area.

Managers are polled to answer questions about business sentiments over the past three months and to provide an outlook for business conditions, as well as expected output prices in the next quarter. The index is calculated as the arithmetic mean of summary balances of survey answers to the questions:

• about business conditions for the last three months (whether they have improved, worsened or remain unchanged);
• about a change in the demand for their services for the last three months (whether its has increased, decreased or has not changed);
• about the expected demand for their services in the next three months (whether it is expected to grow, fall or stay at the same level).

Respondents are asked to provide a qualitative evaluation of the above variables, rather than qualitative ones.

Due to the generalized nature of the Services Sentiment Indicator, it reflects a relative picture of business conditions in the euro area. Economists consider it as one of the composite indicators of economic development. The indicator growth speaks of improvements in service sector conditions and is a leading indicator of economic development. Investors interpret the index growth as a signal to increase investment in appropriate companies.

Index changes usually have a weak and short-term effect on euro quotes. However, sharp movements of the index chart can be seen as a serious indicator of changing economic conditions.