■ Confidence kept on increasing in the eurozone. The Economic Sentiment Indicator (ESI), which tracks GDP growth relatively well, gained 0.5 point in January, reaching 100.9, its highest level since summer 2011. The ESI has been on upward trend since May 2013. However, the pace of increase moderated, one element which might deserve attention in the coming months.
■ The improvement was mainly driven by France and Germany, were the ESI gained respectively 1.1 and 0.7 point, while confidence was almost stable in the other major economies of the area. Germany, however, is in a much more advanced phase of the recovery. The German ESI is around 7 points above the ESI level of the other major economies of the zone.
■ The sectorial breakdown provided an encouraging message. Confidence in the industrial sector, which led the recovery over past months, declined, as manufacturers’ assessment of stocks worsened and orders slightly decreased. Production expectations decreased accordingly. By contrast, confidence in the more domestically oriented services sector rose markedly. This is welcome news as it might signal that the recovery is spreading to the rest of the economy. Confidence among consumers and in the retail sector was also on the rise.
■ Employment indices were relatively well oriented. Employment expectations increased in the services and retail sector, while they remained stable in the industry. Consumers’ fears of unemployment kept on receding. Yet, hard labour data did not show any significant improvement so far. After contracting for several quarters, employment has just stabilised in Q3. Before launching new investment plans and hiring new staffs, probably businesses want to have more concrete evidence that the recovery is based on solid foot.
■ Lastly, the survey confirmed the absence of price pressures in the economy; prices indices were almost stable at low levels. To sum up, the survey provided mixed messages. While there are signs that the recovery is spreading from the manufacturing to the rest of the economy, its low pace might be a case of concern.
BY Clemente DE LUCIA
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