According to the report from European Commission, in January 2021, the Economic Sentiment Indicator (ESI) edged down in both the euro area (-0.9 points to 91.5) and the EU (-0.6 points to 91.2) on a monthly basis. The Employment Expectations Indicator (EEI) also decreased (-1.6 points to 88.8 in the euro area and -1.3 points to 90.0 in the EU).

In the euro area, the ESI’s decrease in January was driven by sliding confidence in retail trade and smaller losses in services and consumer confidence. Confidence in industry improved, while it remained broadly unchanged in construction. Amongst the largest euro-area economies, the ESI dropped in France (-2.6) and Germany (-2.3), while it improved in Spain (+2.4), the Netherlands (+0.6) and Italy (+0.4).

Industry confidence firmed (+0.9), as managers’ assessments of the current level of overall order books improved for the seventh month in a row. Services confidence weakened further compared to December (-0.7), due to worsened assessments of the past business situation and, to a lesser extent, past and expected demand. The decline in consumer confidence (-1.7) reflected a deterioration in all its four components, i.e. households’ assessments of their past and future financial conditions, their intentions to make major purchases and especially their expectations about the general economic situation. The slide in retail trade confidence (-6.0) was fuelled by managers’ assessments of the past business situation and the adequacy of the volume of stocks, both of which deteriorated to an extent not seen since the first wave of the COVID-19 pandemic in spring 2020. Construction confidence remained broadly unchanged (+0.3), as managers’ improved appraisals of the level of order books were counterbalanced by more muted employment expectations.