European economic sentiment takes a hit in April

29th Apr 2024 10:13

(Sharecast News) - Economic sentiment took a hit across both the eurozone and the wider EU in April, according to survey data released on Monday, alongside a downturn in employment expectations.

The European Commission's Economic Sentiment Indicator (ESI) saw a slight decrease in both the EU - down 0.3 points to 96.2 - and the euro area - down 0.6 points to 95.6.

Similarly, the Employment Expectations Indicator (EEI) experienced a more pronounced decline in both regions, down 0.5 points to 101.7 in the EU and off 0.7 points to 101.8 in the common currency area.

Despite the declines, however, the EEI remained above its long-term average.

"The Economic Sentiment Indicator for the eurozone decreased in April, at odds with the positive message we have been getting so far from other surveys," noted analysts at Oxford Economics.

"Among the largest countries, France surprised on the downside with a large monthly drop."

The marginal decrease in the ESI within the EU was driven by slightly diminished confidence in industry and services, while confidence in retail trade, construction, and consumer sentiment remained relatively stable.

Notably, significant shifts were observed in the largest EU economies, with France experiencing a notable decline (-4.8), while Spain, Germany, and Poland saw improvements.

Industry confidence declined due to managers' assessments of current overall order books, while services confidence also decreased, primarily driven by worsened assessments of past and expected demand.

"Overall, at the sectoral level, the drop happened both at the industry and services level," Oxford Economics added.

"Although it is probably the industry level that drove the sharp drop in France, suggesting that there is still a notable divergence between a stronger services sector and weaker manufacturing activity.

"Although we expect a cyclical improvement in the industrial sector will lead to a narrowing of the gap, growth this year will be mainly driven by services."

Consumer confidence remained largely unchanged, as improvements in household financial situations were offset by concerns about the general economic situation.

Employment expectations saw a slight decline, particularly in industry and retail trade, although the construction sector exhibited more optimistic plans.

Consumers' unemployment expectations worsened somewhat.

Selling price expectations decreased in services and retail trade but remained stable in industry and construction.

The European Commission's Economic Uncertainty Indicator decreased further, reflecting reduced uncertainty in future business and financial situations.

Its Labour Hoarding Indicator also saw a minor decrease, remaining slightly above its long-term average but significantly below peak levels observed during the Covid-19 crisis.

Oxford noted that first quarter GDP data for the eurozone was expected to post a 0.2% quarterly increase, after a flat number in the final quarter last year.

"But today's data show that momentum will build up very gradually, with only the second part of this year posting a faster acceleration in GDP."

Reporting by Josh White for Sharecast.com.