The EU will release today its Economic Sentiment Indicator (ESI) for June. Following an unprecedented pandemic-induced collapse, the index improved
The EU will release today its Economic Sentiment Indicator (ESI) for June.
Following an unprecedented pandemic-induced collapse, the index improved slightly in May as businesses re-opened, signalling the start of European economic rehabilitation.
The ESI measures business and consumer confidence and is derived from weighted industrial (40%), service (30%), consumer (20%), construction (5%) and retail trade (5%) indicators. In May, the ESI for the EU climbed to 66.7 from 63.8 in April and to 67.5 from 64.9 in the eurozone.
Expect economic sentiment to maintain its recent trajectory. The removal of internal European borders, a hallmark of the EU’s common market, is crucial to jump-starting stalled economies and could boost the index in the short-term.
However, recovery will remain fragile as the EU is projected to contract by 7.5% in 2020. The robustness of economic revival across the bloc will be uneven and dependent on a number of factors, such as the rate of lockdown easing, degree of economic diversification and the financial reserves of each member state. Staggered recovery timelines could invite subsequent waves of infection and pose an existential threat to both the single market and the eurozone, especially as disputes concerning debt-sharing grow.
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