European Business Cycle Indicators (3rd Quarter 2021)

After reaching an all-time high in July, the Economic Sentiment Indicators (ESI) for the EU and the euro area (EA) slipped in August and then stabilised in September, ending the third quarter of 2021 broadly unchanged from the end of the second quarter, at a still very high level.


Key facts
  • Confidence improved significantly only in the construction sector in the third quarter of 2021, while it decreased markedly in the retail trade sector and, to a lesser extent, in services. Confidence indicators remain well above their respective long-term averages and score above their respective pre-pandemic readings of February 2020.
  • The Economic Sentiment Indicator (ESI) deteriorated markedly in the Netherlands (-2.7) and also in Italy (-1.1), France (-1.6) and Poland (-1.8), while it increased in Spain (+2.2) and Germany (+0.8). In September, the ESI remained well above its long-term average of 100 and its pre-pandemic level in all six countries.
  • In July, capacity utilisation in manufacturing increased only modestly by around ½ percentage points in both the EU and the EA compared to the last survey of April.
  • At just below 83% in July, both indicators are at their highest level since January 2019, and well above their long-term averages of around 80½%.
  • The share of industry and construction managers pointing to shortage of labour force and material and/or equipment as factors limiting their production activity reached the highest values on record during the third quarter of 2021.


New survey-based measures of economic uncertainty

The empirical analysis shows the new uncertainty indicators to well reflect the COVID-19 pandemic shock in spring 2020. Comparison with a selection of existing measures of uncertainty suggests that the new indicator follows broadly the same trend as previous uncertainty measures but is less volatile and provides reliable informational content at an early stage. Finally, the sectoral breakdown of the new indicator delivers intuitive cross-sector and cross-branch differences.

The Commission will start to publish the new uncertainty indicators in October 2021, in its regular press release on latest survey results.


Source: European Commission


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