Industrial Sentiment

The Industrial confidence indicator is the European Commission's monthly gauge of euro area manufacturing mood that flags turning points early. It is compiled by the Commission's Directorate-General for Economic and Financial Affairs (DG ECFIN), the department running business surveys. The programme began with an industry survey in 1962.

It averages managers' qualitative answers on output plans, order backlogs and inventories, after seasonal adjustment. It tracks opinions, not output, unlike the Purchasing Managers' Index (50-line boom/bust survey) and Business Climate Indicator (separate euro area manufacturing model).

Fieldwork runs in the first 2 to 3 weeks of each month. Business replies are due at least 5 working days before month end. Results appear 2 working days before month end at 11h00, except December in early January. An early consumer reading appears around the 20th to 23rd at 16h00.

The release covers sentiment, jobs, uncertainty and sector tables, and country weights update each January. Extra factory questions run in January, April, July and October, investment questions in April and November, and history is revised for seasonal and national data.

The headline averages 3 equally weighted balances (positive share minus negative share) from the factory survey.

• Production expectations, weight 1/3: captures forward-looking output plans for the next 3 months (increase, unchanged or decrease).
• Current order books, weight 1/3: captures the current demand backlog level (more than sufficient, sufficient or not sufficient).
• Stocks of finished products, weight 1/3: captures inventory overhang with inverted sign, since high stocks are negative (too large, adequate or too small).

In the 29 August 2024 release, euro area industry confidence rose to -9.7 from -10.4 in July 2024, still far below its -3.5 long-term average. The Economic Sentiment Indicator edged up 0.6 points to 96.6, still below its 100 average, and the Employment Expectations Indicator rose 1.3 points to 99.2.

Stronger production expectations and leaner stocks drove the rise, while order book views worsened. Export order views improved even as overall backlogs fell, so the headline hid a split. Replies ran from 1 to 22 August 2024, and history was revised for seasonal adjustment and French data, showing past values are not frozen.

1. Response shares: Within each group, count the share answering positive, unchanged and negative, weighted by firm size where used.
2. National results: Combine groups using share weights, such as sector value added shares summing to 1.
3. Balances: Subtract negative share from positive share (B = P - M), giving a -100 to +100 scale in percentage points.
4. Euro area aggregation: Average national shares using country weights. Weights are industry value added shares excluding construction at constant prices, smoothed over 2 years and updated each January.
5. Seasonal adjustment and headline: Adjust the 3 balances for seasons with Dainties, a variance-weighted mix of models, then average them with stocks inverted. As an illustration with invented shares, (8 + (-15) - 6) / 3 = -4.3 points, a negative reading despite positive output expectations.