Economic Sentiment

What is the Economic Sentiment Indicator?

The Economic Sentiment Indicator (ESI) is a recurring composite from DG-ECFIN, the European Commission economics arm. It runs within the Joint Harmonised EU Programme of Business and Consumer Surveys. It pools recurring judgements and expectations from manufacturing, services, retail trade and construction firms plus households across member states. It tracks growth across member states, the area and the union.

It blends 15 survey balances that feed 5 confidence indicators. A reading of 100 marks the average; readings above 100 show above average mood and readings below 100 show below average mood. Its aim is tracking GDP growth, so it does not measure output itself and it is not a pure consumer gauge. Financial services confidence is computed separately and stays outside the gauge.

When is it released and what happens each release?

Responses are gathered early in each cycle. National institutes send business and consumer results before the end of the reference cycle. DG-ECFIN releases detailed results near the end of the cycle, while one release in each sequence follows a shifted timetable.

An early consumer reading comes before the full release. Each release carries sector indicators plus ESI, EEI jobs outlook and EUI uncertainty gauge. The Business Climate Indicator appears the same cycle, and some releases carry additional sections and investment results. Tables follow commentary in a separate file.

There is no scheduled revision cycle thanks to a frozen sample. History can still move on resubmissions or seasonal updates. Coefficients update on a fixed schedule with only a small effect on history.

What moves the Economic Sentiment Indicator?

Sector answers drive it, with factory and services answers carrying most weight. Each group reflects its own activity mood.

• Industry, 40%: production expectations, order books and stocks with inverted sign capture factory demand mood.
• Services, 30%: business climate, past demand and expected demand capture services activity mood, with each services balance carrying 10%.
• Consumers, 20%: past and expected household finances, expected economic situation and big purchase plans capture household mood.
• Retail trade, 5%: present and expected shop conditions plus stocks with inverted sign capture retail mood.
• Construction, 5%: order books and hiring plans capture building sector mood.

How is the Economic Sentiment Indicator calculated?

• Balances: Each answer becomes a balance that subtracts negative shares from positive shares, ranging from minus 100 to 100.
• Country aggregation: Euro area totals weight countries by economic size using output or spending shares that are smoothed. Shares build on economic references.
• Seasonal adjustment and standardise: Remove regular seasonal patterns with Tramo-Seats software, then subtract the mean over a frozen reference window and divide by volatility.
• Weighted average and rescale: Combine the 15 standardised balances using sector shares, dividing only by available series if some are missing. Then convert the average so history centres on 100 with a spread of 10.
• Band and reading: About 68% of readings sit between 90 and 110; above 100 means above average mood and below 100 means below average. There is no fixed contraction threshold.

Key point: Do not read it like a PMI activity index where 50 means neutral. Consumers carry only 20%, and weights apply to the 15 standardised parts rather than the 5 indicators directly. Its purpose is tracking GDP growth, and reading is level versus 100 plus direction of change with no fixed trigger.