European Union Economic Sentiment Indicator

The Economic Sentiment Indicator is calculated monthly based on five market confidence indices, which are: the Industrial Confidence Indicator (40%), the Service Confidence Indicator (30%), the Consumer Confidence Indicator (20%), the Construction Confidence Indicator (5%) and Retail Trade Confidence Indicator (5%). The weights of the indices in the resulting calculation are determined in accordance with two criteria: the representativeness of the sector and its share in the GDP calculation.

All components of the indicator are calculated based on factor analysis involving surveys among the leading industry representatives. The sample size for the eurozone is about 55 thousand companies representing all sectors of the manufacturing industry and 24 thousand households in the eurozone. The number of companies and households per country is selected in accordance with the contribution of a particular country to the economy of the euro area.

Companies evaluate current business conditions (number of orders, production output, inventories, consumer activity) and provide an outlook for the next three months. Interviewed households evaluate their personal financial conditions, the possibility of savings, employment and the overall situation in the economy of the eurozone (country).

The index is seasonally adjusted. Respondents are asked to provide a qualitative evaluation of the above variables (whether situation has improved, deteriorated or remained unchanged).

The indicator is used to evaluate the current euro area economy and forecast its further development. The growth of the Economic Sentiment Indicator points to an improvement in the situation both at the industry level and at the consumer level. This may lead to a short-term growth in euro quotes.