Eurozone economic sentiment broadly stable in May

Eurozone economic sentiment was little changed in May, according to a survey released on Monday by the European Commission.

The EC’s Economic Sentiment Indicator (ESI) for the bloc ticked up to 105.0 from 104.9 in April. This compares with an average of over 116 recorded in the second half of last year. Meanwhile, the indicator the European Union nudged down 0.5 points in May to 104.1.

In the EU, the slight decline in the ESI was put down to weaker confidence among industry managers and, to a lesser degree, consumers. Services, retail trade and construction confidence remained virtually unchanged, the survey showed.

Andrew Kenningham, chief Europe economist at Capital Economics, noted that the EC economic sentiment indicator is still well below its pre-Ukraine war level and consistent with economic activity stagnating in Q2.

"The survey also suggests that inflationary pressures remain intense," he said. "Looking ahead, even if economic activity is holding up a bit better than we had feared in April and May, the outlook for this year remains poor.

"Activity is being sustained by the post-Covid rebound in leisure and hospitality and backlog of orders for the manufacturing sector, both of which are likely to fade soon. We still think that GDP growth will be weaker than the consensus or ECB expects this year."