Recent EU survey data does not point to an immediate recovery nor further deterioration of trade relevant economic activity. Manufacturing activity continues to be weak, but overall retail sales development has been somewhat positive. Several indicators are looking positive for Southern Europe, which could lead a recovery of economic activity. This article includes an interactive dashboard with key economic and employment sentiment indexes, confidence indicators and industry and retail data for the 27 EU Member States and Türkiye. The analysis is based on set of surveys managed by the Directorate General for Economic and Financial Affairs (DG ECFIN).
Overall EU Outlook
Most recent survey data neither points to a broad recovery nor further deterioration of economic activity in the European Union. The overall Economic Sentiment Index (ESI) as well consumer, services, retail, and industrial confidence indicators stabilised in January and February. Construction industry confidence saw further deterioration.
Much of this weakness is driven by Germany, which in 2022 accounted for about 30% of EU manufacturing value added. Sentiment in France and Italy, which each account for a further 11-12% of manufacturing value added is better, but the impact of Germany’s economy is acting as a drag on overall EU growth.
Industrial Outlook
From a trade perspective we are primarily concerned with industry (manufacturing) activity and retail. At an industry level, latest date shows several negative trends:
- The majority of firms continue to report declining order books, both overall as well as export orders, although there was a slight uptick in the latter.
- Finished product inventories remain high, but there does appear to be a trend towards further correction of inventories.
- The production trend has been mixes, but the latest month shows further deterioration. In the balance production expectations appear to have improved. And the same applies to price expectations.
Order book, inventories and production appear to be following a similar trend across the EU, but production and price expectations differ across economies. The greatest immediate opportunities for growth appear to be in Southern Europe.
The major factor increasingly limiting manufacturing output is demand. This is a change from mid 2022, where material and equipment shortages and to a lesser extent labour were the main limiting factors.
Industrial capacity utilisation has been trending downwards since early 2022, as has the number of months of production covered by the existing order book. Export expectations are down, and firms appear to feel less competitive in domestic, EU and extra-EU markets.
Based on manufacturing capacity utilisation data, very few European economies have seen an uptick in overall figures – key economies such as Germany and Italy have seen declines in the last 12 months, while French utilisation levels have remained flat.
Retail Outlook
The outlook for retail appears to be better than manufacturing. Retail sales development improved December and January and inventories appear to be coming down. The balance of order and business expectations continue to be negative, but with regard to orders and prices there has been an uptick. Employment expectations have dropped.
Outside Germany, sales developments in other economies has been positive, although order and business expectations in Western and Northern Europe generally appear to be generally negative.
Dashboard
Below is an interactive dashboard with all the above charts, as well as additional panels that allow the display of country specific time series.