Economic sentiment indicator
03. Jul 2023
Industry less optimistic

The Economic Sentiment Indicator (ESI) is falling and is significantly lower than in the previous two surveys. Confidence levels vary across the sectors, with optimism waning in the industry and retail, while consumer confidence remains stable.

The ESI for June 2023 is -6, which is well below the long-term average of 17. The biggest drop since the previous survey in January 2023 came in the industrial sector, which predominantly represents fishing and aquaculture. The confidence indicators for retail and construction also took a relatively big hit, while the service sector only saw a slight drop. The consumer confidence indicator remains stable.

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The Economic Sentiment Indicator (ESI) is made up of five biannual surveys gathering the views of consumers and the four industrial sectors on the current and expected economic situation. The surveys have been conducted twice yearly in January and June since 2006. The latest survey was carried out in June 2023. The table below shows the indicators for each survey in the past two years.

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Consumers expect stronger economy in one year

The consumer confidence indicator is 1 in the latest survey, up from 0 in the January 2023 survey. This increase is based on a slightly more optimistic outlook on consumers’ expected financial situation over the next 12 months compared to today. Consumers also have a more optimistic outlook on the general economic situation 12 months from now compared to today. This confidence, however, remains below the long-term average.

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Still not the right time for major purchases

When prices rise, consumers tend to hold back on major purchases. Nevertheless, compared to the January 2023 survey, slightly fewer consumers say now is not the right time to purchase large items such as furniture and electronics. The net confidence indicator is still well below the long-term average. Consumers rarely believe there is an ideal time to buy a house or a car. They do, however, expect that price growth will have slowed down one year from now compared to the previous year.

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Survey questions and graphs are available on the consumer page.

Rising prices affect retail confidence

Consumer price growth is coming down but prices remain high, and that is reflected in retail sales. The Consumer Price Index (CPI) for Q1 2023 shows a 14% year-on-year drop in sales volume in the ‘clothing and footwear’ commodity group. The confidence indicator for the retail sector is -12, compared to 2 in January 2023. As a major supplier of goods for the domestic market and household consumption, this sector is negatively affected by the growing cautiousness of consumers and the reduced willingness to buy.

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The retail sector does, however, have a slightly more optimistic outlook on the year ahead than in the previous survey.

Survey questions and graphs are available on the retail trade page.

Construction confidence is waning but remains high

The confidence indicator for the construction sector dropped from 61 in Jaunary to 46 in June but remains well above the long-term average of 22.

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An increasing number of construction firms list labour shortage as the main production challenge. Staff numbers are expected to remain at the current levels for the next 12 months. Construction firms have, on average, reported that they have secured work for the next 19 months, but the number of orders has gone down.

Survey questions and graphs are available on the construction page.

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Apprehension in the primary sector and industry

The industrial confidence indicator went down from 8 in January to -15 in June. This is mainly due to fewer orders and an expected drop in sales prices. The surveyed companies reported that their market share had decreased, domestically as well as internationally, since the previous survey.

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Service sector outlook remains dim

The service sector is also more pessimistic now than in previous surveys. Although 2022 became a record year for hotels and tourist numbers approached pre-Covid levels, companies in the services sector are not satisfied with their turnover in the past year. The outlook for the coming year is not good either. The net confidence indicator currently stands at -9, which is well below the long-term average of 32.

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Survey questions and graphs are available on the primary sector page and the services page.

About the ESI

The economic sentiment indicator (ESI) is a composite indicator compiled twice annually (January and June) that calculates the confidence that households and four industrial sectors have in the economy.

Rather than reflecting a real economic figure, the ESI represents the difference between the percentages of respondents giving positive and negative replies about their current and projected economic outlook.

The ESI is a weighted average of the balances of replies to selected questions addressed to households and companies in four industrial sectors.