European Union Business Climate Indicator

Business Climate Indicator (BCI) evaluates development conditions of the manufacturing sector in the euro area every month. The indicator is based on factor analysis involving surveys among the leading industry representatives. The sample size for the eurozone is about 20 thousand companies representing all sectors of the manufacturing industry in the eurozone. The number of companies per country is selected in accordance with the contribution of a particular country to the economy of the euro area.

Unlike the Industrial Confidence Index, which is calculated based on three values, the BCI is calculated using five variables. The calculation includes the results of a survey on production volumes, number of new orders for domestic consumption and for export, inventories for the last three months and outlook for production volumes.

Respondents are asked to provide a qualitative evaluation of the above variables: whether situation has improved, deteriorated or remained unchanged.

The Business Climate Index is an indicator of the eurozone's manufacturing sector development. Due to its generalized nature, 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 BCI growth speaks of improvements in manufacturing sector conditions and is a leading indicator of production output. Investors interpret the index growth as a signal to increase investment. Index changes usually have a weak and short-term effect on euro quotes. However, sharp movements of the index chart are usually seen as a serious indicator of changing economic conditions.