State of the Union: Five key takeaways from Ursula Von der Leyen
17 September 2020
Key points from von der Leyen's state of the union speech [caption id="attachment_14822" align="alignnone" width="640"]...
In January, the Economic Sentiment Indicator (ESI) rose by 1.2 points in the EU and by 0.6 points in the euro area, to 92.8 and 93.4, respectively – the first pick-up in sentiment since March 2011. The improvement was mainly driven by increasing confidence in the services sector and – to a lesser extent – among consumers and in the construction sector. Among the largest euro-area Member States, sentiment improved in Germany (+2.3) and Spain (+1.8), while it deteriorated in France (-2.1), Italy (-1.1) and the Netherlands (-1.0). As to large Member States in the rest of the EU, sentiment increased in both the UK (+5.0) and Poland (+2.7). The ESI is above its long-term average only in Germany.
Confidence in industry improved only marginally in the EU (+0.4), staying just below its long-term average, while it remained unchanged in the euro area. In both regions, managers had a more positive assessment of their companies' past production and their export order books. At the EU level, firms also expressed increasing optimism about expected production and the current level of order books, though these improvements were partially offset by a worsening in the assessment of stocks of finished products. In the euro area, production expectations were unchanged, while managers' assessment of their order books deteriorated. On the other hand, euro-area managers were more positive about their companies' stocks.
Confidence in services rebounded in both the EU (+2.9) and the euro area (+2.0), thanks to more positive assessments of the past business situation, past demand, and expected demand. Confidence in construction also improved in both the EU (+1.2) and – albeit to a lesser extent – in the euro area (+0.6). On the contrary, confidence in retail trade worsened significantly in both the EU (-2.7) and the euro area (-3.3).
Managers revised their employment plans upwards in all business sectors except for retail. At the same time, expected selling prices were also revised upwards across all sectors.
Confidence among consumers improved by 1.3 points in the EU and by 0.6 points in the euro area, mainly on the back of easing unemployment fears in both regions. Consumers' assessment of the expected general economic situation and their own financial situation improved at the EU level, but remained unchanged at the euro-area level.
Confidence in financial services – not included in the ESI – increased in both the EU (+6.0) and in the euro area (+9.1), on the back of more optimistic managers' expectations about demand for their companies' services. Managers also assessed recent developments in the business situation and demand more positively.
According to the quarterly survey of the manufacturing sector, also carried out in January 2011, managers' expectations of export volumes increased in both the EU and the euro area, while at the euro-area level there was also an improvement in managers' appraisal of their competitive position on foreign markets outside the EU. Capacity utilisation increased marginally. At 80.2% in the EU and 79.9% in the euro area, capacity utilisation remains still below its long-term average.
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