Is Barbados and the world witnessing a resurgence in business confidence?
In April, after three consecutive months of improved readings, the Economic Sentiment Indicator (ESI) remained broadly unchanged in both the euro area (-0.2 points to 103.7) and the European Union (EU) (+0.3 points to 106.4).
The stabilisation of euro area sentiment resulted from increasing confidence in the services sector being offset by opposite developments in the construction sector and among consumers.
Industry and retail trade, by contrast, signalled no major changes compared to the last month. Amongst the largest euro area economies, Spain (+1.3) and the Netherlands (+0.9) saw economic sentiment improving, whereas it declined in France (-1.4) and Germany (-0.6) and remained unchanged in Italy. With managers sending mixed signals, industry confidence remained broadly flat (-0.3). While the appraisals of the current level of overall order books brightened and the assessment of the stocks of finished products was fairly unchanged, production expectations deteriorated markedly.
Of the questions not included in the confidence indicator, past production was viewed much more positively, the same going, to a lesser extent, for export order books.
Service confidence (+0.6) improved on the back of managers’ increased satisfaction with developments in the recent past (past demand and the past business situation). Looking into the future, demand expectations, by contrast, became more cautious. Consumer confidence eased (-0.9) as a consequence of faltering optimism about macro-economic variables, notably the level of future unemployment and the future general economic situation.
Consumers’ expectations in respect of their financial situation and future savings remained largely unchanged. The unchanged level of retail trade confidence (+0.0) reflects managers’ positive judgments on the adequacy of the volume of stocks and the present business situation, coupled with reduced optimism concerning the expected business situation.
Construction confidence (-1.4) declined, with managers revising their employment expectations significantly downwards, while keeping their appraisal of the level of order books broadly unchanged. Lower confidence in financial services (not included in the ESI) resulted from managers’ diverging assessments of the most recent and future developments. While the past business situation and past demand were viewed more positively, demand expectations, which had surged in March, were corrected downwards again.
Employment plans were revised downwards in construction and retail trade, while remaining broadly unaltered in industry and services. Selling price expectations increased among retail trade and industry managers, while remaining broadly unchanged in services and edging down in the construction sector. Consumer price expectations continued the upward trend observed since February.
In line with euro area developments, the headline indicator for the EU remained broadly flat (+0.3). The block’s two largest economies outside the euro area, the United Kingdom and Poland, sent comparatively positive signals (+two) and +1.3 respectively). From a sectoral perspective, developments in industry, consumer services and financial services confidence parallelled euro area trends; however EU developments differed in so far as confidence in retail trade dropped somewhat, while it rallied in construction.
Employment expectations differed from the euro area as the retail trade and construction sectors were signalling upward revisions, while industry managers became more cautious compared to last month. Turning to price expectations, developments in the EU were unequivocal, with also the services and construction sectors revising their assessments upwards.
