The Business Climate Indicator (BCI) for the euro zone decreased by 0.18 points to 0.93 in April 2013, according to official European Union figures released on April 29.
While the assessment of the stocks of finished products remained broadly stable, all other components deteriorated (current order books (overall and export), past production, production expectations). The assessments of past production and overall current order books witnessed particularly sharp declines.
In the euro area, the ESI’s decline was broad-based across all business sectors, with services witnessing the sharpest drop, while consumer confidence went up. Among the five largest euro area economies, economic sentiment worsened significantly in Germany (-2.3), France (-2.0) and Italy (-1.9), while remaining broadly stable in the Netherlands (+0.2) and improving in Spain (+0.9).
The decrease in industry confidence (-1.5) resulted from a much more negative assessment of the current level of overall order books and lower production expectations. Managers’ assessment of stocks of finished products remained virtually unchanged. The past production and, to a lesser extent, the current level of export order books, which are not included in the confidence indicator, were also assessed more negatively.
Services confidence dropped abruptly by 4.1 percentage points, driven by significantly worsened assessments of the business situation and demand over the past three months. Demand expectations deteriorated to a lesser extent. Consumer confidence increased by 1.2 points, based on a marked easing of unemployment expectations and slightly better expectations concerning households’ future financial situation, the future general economic situation and savings over the next 12 months.
Retail trade confidence decreased by one point, driven by worsened business expectations and views on the adequacy of current stocks. The assessment of the present business situation worsened only slightly.
Also, construction confidence decreased (-1.3), based on weaker employment expectations and assessments of order books. Financial services confidence (not included in the ESI) improved markedly (+5.0), fuelled by considerably better assessments of the business situation and demand over the past three months. Demand expectations improved slightly.
Employment plans were revised downwards across business sectors, contrasting with the easing of consumers’ unemployment expectations.Selling price expectations decreased in industry, retail trade and construction, and increased marginally in services.
In the wider EU, the decrease of the ESI was slightly more marked (-1.8). On a sector basis the reason for this was a sharper deterioration of confidence in services (-5.4) and construction (-3.5) compared to the euro area. Regarding the largest non-euro area EU economies, economic sentiment deteriorated significantly in both the UK (-2.0) and Poland (-1.7). As in the euro area, EU financial services confidence improved strongly (+4.8).
Similar to the euro area, employment plans worsened across all business sectors and selling price expectations decreased with the exception of the service sector. Consumers’ price expectations decreased significantly in both the euro area and the wider EU.
In the euro area, managers reported no changes in the number of months of production assured by orders on hand compared with the previous survey carried out in January. However, managers’ assessment of developments in overall new orders worsened again after last quarter’s improvement and their appraisal of their competitive position on foreign markets outside the EU deteriorated mildly.
At the same time, export volume expectations went up for the second consecutive quarter. The balance of managers reporting more than sufficient, rather than insufficient, production capacity increased. However, the estimated rate of capacity utilisation remained unchanged at 77.5 per cent.
Developments in the wider EU were largely in line with euro area developments. Contrary to the euro area, managers’ assessment of their competitive position on foreign markets outside the EU improved mildly. The capacity utilisation fell slightly, to 77.6 per cent.
According to the bi-annual investment survey carried out in March/April this year, real investment in the manufacturing industry is expected to increase by 1 per cent in the euro area in 2013. In the previous survey conducted in October/November of last year managers expected a decrease by one per cent. As for 2012, managers now estimate a growth of two per cent, compared to a decline by two per cent estimated in October/November.
In the wider EU, real investment growth in manufacturing is expected to speed up to three per cent in 2013, while the October/November survey pointed to flat investment. Regarding 2012, the current estimation points to a four per cent increase compared to one per cent as estimated in October/November.
(Photo: Leah Sawyer)