According to the report from European Commission, in May 2020, economic sentiment on the continent showed first signs of a recovery after the record slumps of March and April. The Economic Sentiment Indicator (ESI) edged up in both the euro area (by 2.6 points to 67.5) and the EU (by 2.9 points to 66.7).1 The Employment Expectations Indicator (EEI) led the way, bouncing back by 11.3 points in both areas to – still historically low – levels of 70.2 (euro area) and 70.9 (EU) points. 

In the euro area, the ESI’s uptick reflected a recovery in industry and consumer confidence which neutralised about a fifth of the combined slump of March and April. Services confidence, by contrast, continued declining, albeit at a lower rate than in the preceding two months. Changes in construction and retail trade confidence were much more contained, with the former posting a small decline and the latter remaining virtually flat.

The recovery in industry confidence (+5.0) was entirely attributable to a vivid improvement in managers’ production expectations which reversed roughly half of the decline registered over March and April. Services confidence continued declining (-5.0), but at a

lower pace than in March and April. While views on the past  business situation and past demand got, again, much worse, significantly improved demand expectations provided a glimmer of hope for the months to come. Consumer confidence recovered (+3.2) on the back of households’ much improved expectations in respect of their financial conditions, their intentions to make major purchases and the general economic situation. Construction confidence fell slightly (-1.3), as the assessments of the level of order books continued plummeting, but managers’ employment expectations brightened significantly. Finally, financial services confidence (not included in the ESI) edged up (+3.3), as the persisting downward trend in the assessments of the past business situation and past demand was outweighed by a turnaround in managers’ demand expectations.