EU economic confidence drops in September on gloomy consumer outlook despite industry gains

LONDON (ICIS)–Wilting consumer confidence weighed on economic sentiment in Europe in September, according to the latest data from the EU Commission on Thursday.

The Economic Sentiment Indicator (ESI) fell by 0.4 points in the EU to 92.8 points, and by 0.3 points to 93.3 points in the eurozone, as deteriorating expectations from consumers offset minor gains in industry confidence.

September marked the second month in a row that consumer confidence deteriorated, dropping 1.6 points on the previous month as respondents assessed their household’s past and future financial situation as worse. Intentions to commit to major purchases also declined.

While current levels of order books appeared worse, industry confidence rose 0.3 points on the previous month as production expectations improved for the second consecutive month. Stocks of finished goods were viewed more in line with normal levels.

Export orders were assessed as broadly stable, and past production levels improved on the previous month, although this data was not included in the overall reading for industry confidence.

A decline in the construction sector supported the general dwindling confidence in Europe, dropping 0.8 points on August’s level.
Both levels in order books and employment expectations contributed to the pessimistic sentiment, with 28.6% of managers citing labour shortages after tracing marginal gains (up 0.3 points), keeping the reading at a high level.
Poor demand also diminished confidence, rising 0.7 points to settle at 28.8% – the highest reading since July 2020.

Although shortages of materials and equipment rose 0.7 points, the figure remained significantly lower than averages over the past two years, settling at 9.9%. In contrast, while financial constraints for the construction sector fell by 0.7 points, that remained above the long-term average at 9.9%.

Retail registered a 0.4 point decline in confidence on the previous month on worse expectations of the past business situation, but were more optimistic about the expected business situation, while stocks remained stable.

Confidence in the services sector remained relatively stable, dropping by 0.1 points as poor views of past demand were almost negated by more optimistic expectations.

In contrast to the wider economic sentiment indicators, the employment expectations indicator (EEI) gained 0.6 points in the first lift since February, as gains are expected in the services sector.

Selling price expectations tracked a further decrease but remained elevated in the services and trade sectors.

For industry and construction, selling prices stayed at their long-term average levels, while consumer price expectations for the coming 12 months increased, and perceptions of the past year remained stable at high levels.

The Economic Uncertainty Indicator (EUI) rose by 1.6 points to 21.1 points, spurred on by consumer doubts over their future financial situation and uncertainty in the services, industry and trade sectors. Uncertainty in the construction sector decreased.

Front page image shows residential construction in Korb, Germany (image credit: Lilly/imageBROKER/Shutterstock)