Business and Consumer Confidence Improve in the Euro Area

The European Commission's Business Climate Indicator for the Euro Area is designed to deliver a clear and early assessment of the cyclical situation. The extent that it has done so in the past can be seen in the first chart that shows the Indicator and the year to year change in industrial production. With a correlation between the two series of 90%, the R-Square is 81%, indicating that the business climate indicator accounts for about 81% of the changes in the industrial production. The rise in the indicator for the third successive month in June is a good sign, but it is still at an historically low level.

The individual results of the surveys of industry, the construction, services, and retail trade businesses are reported as a percent balances between those expecting improving and those expecting deteriorating conditions in important aspects of business, such as orders, production outlook, inventories, etc. Except for construction, the other businesses have shown improvements over the last few months as can be seen in the second chart.