UBS Economics-European Economic Comment _Eurozone sentiment Businesses an...-108459457.pdf

ab30May2024GlobalResearchandEvidenceLabEuropeanEconomicCommentEurozonesentiment:BusinessesandconsumersslightlymoreoptimisticOveralleconomicsentimentimprovesinMayPartiallyreversinglastmonth"sfallandinlinewiththelatestPMIs,theEuropeanCommission"sEconomicSentimentIndicator(ESI)increasedagaininMay.Theresultspublishedtoday(surveyperiod1-23May)showapickupinoverallsentiment(0.4pointsto96.0)asbothconsumerconfidenceandbusinessconfidenceimproved.ThelatestsentimentindicatorsthusindicatethattheEurozoneisexperiencingpositivegrowthmomentuminQ2,buttheproofinharddataisstillpending.BusinesssentimentmixedacrosssectorsAmongthebetterbusinesssurveyresults,industrialconfidencesawthelargestincreaseby0.5pointsto-9.9(Figure7Industrialconfidencebycountry,balance),inlinewiththeincreaseintheManufacturingPMIanddrivenbyGermanyandItalywhileFranceandSpainsuffereddeclines.Servicesconfidencealsopostedgainsof0.4pointsto6.5(Figure9Servicesconfidencebycountry,balance).Retailconfidencestagnatedat-6.8asasizablegaininGermany(+2.0)wasoffsetbydeclinesinothercountries(Figure11Retailtradeconfidencebycountry,balance).Constructionconfidence,stillweighteddownbytightmonetarypolicy,retreatedforthefifthconsecutivemonth,by-0.1pointsto-6.0(Figure13Constructionconfidencebycountry,balance).Nevertheless,theemploymentexpectationsoftheconstructionsectorimprovedinMay,indicatingongoingresilience.Businessesintheservicesectoralsocontinuehiring(Figure15Businessemploymentexpectationsforthenext3monthsbysector,standardizedbalance),whilethereissomejobsheddingexpectedinmanufacturingandretail.Households"unemploymentexpectationsremainlow(Figure3Priceandunemploymentexpectations,balance)whichunderpinsourexpectationofimprovingprivateconsumption.ImprovingfinancialsituationsupportsconsumersentimentMeanwhile,consumerconfidenceremainedonitsslowandgradualpathhigher(+0.pointsto-14.3).Thisisstillbelowthelong-termaverageof-11.6butatthehighestlevelsinceFebruary2022(Figure1Consumerconfidence,balance).ThreeofthefourcomponentsoftheconsumerconfidenceindexroseinMay(Figure2Consumerconfidencedetails,standardised).Households"outlookforthegeneraleconomicsituationoverthecoming12monthssawthebiggestincrease.of1.1pointsto-24.4.Theassessmentofhouseholds"ownfinancialsituationovernext12monthsrose0.2points-3.8(whereastheassessmentofthelast12monthsslippedmarginallyby-0.1pointsto-12.1),supportingourinterpretationthatrealwagegainshelptoliftsentiment.Accordingly,expectationstoconductmajorpurchasesimprovedslightlyaswell,by0.3pointsto-17.1,edgingclosertothelong-termaverageof-16.4.Atacountrylevel,consumersentimentimprovedinallfourEurozonecountries.France(+1.9)sawalargeincreasethatlargelyreversedlastmonth"sweakness,followedbyItaly(+0.4),Germany(+0.3)andSpain(+0.2)(Figure4Consumerconfidencebycountry,standardized).BetterconsumerconfidencetranslatingonlyslowlytoconsumerspendingConsumerconfidenceintheEurozonehadbeendepressedamidaverysignificanthouseholdrealincomesqueeze,butrealwagegrowthhasnowturnedpositiveasinflationfallsandnominalwagegrowthremainshigh(