According to data released by the European Commission the Economic Sentiment Indicator (ESI) edged up in July to 102.2 (by 1.9 points) in the European Union as a whole, and to 101.3 (by 2.3 points) in the Euro area. These results, as well as positive data also in consumer confidence indicators, are highly influenced by positive readings in Germany.

In July, the Business Climate Indicator (BCI) for the Euro area picked up after the pause observed in June. The improvement in the indicator suggests that economic activity in industry will continue to recover in the coming months as already suggested by first data of year 2010, although it has still some way to go to reach its pre-crisis level.

The majority of Member States reported improvements in Economic Sentiment Indicator (ESI). Among the largest Member States, Germany registered the most significant increase (+4.0), followed by France (+2.6), Poland (+1.9) and Italy (+1.7). Improvements were less pronounced in the UK (+1.4) and the Netherlands (+1.2). In contrast, sentiment declined in Spain (-2.2).

Managers in industry were upbeat about their order books and production trend observed in recent months. They were also more optimistic about their export order books. Meanwhile, managers' assessment of their stocks of finished products remained unchanged, and their production expectations were cautious. Sentiment in industry, which increased by 2 points both in EU27 and Euro area, was the main contributor to the overall improvement.

The quarterly manufacturing survey indicates an increase in capacity utilisation. It now stands at about 77% in both the EU and the Euro area, though still below the long term average (81%).

Furthermore, confidence among consumers regained momentum (+3 in the Euro area and +1 in the EU), being that more optimism about the general economic situation and very significant easing unemployment fears in Germany contributed to the overall improvement.

Confidence in services improved by 2 points in the EU and the Euro area, driven by brighter assessments of demand and the business situation over the past 3 months. Sentiment in the retail sector increased by 2 points in the Euro area and by 4 points in the EU, mainly owing to upbeat business expectations in the UK and in Germany.

As for financial services confidence, which is not included in the ESI, recorded the second significant drop in a row in the EU (-6), driven mainly by a sharply negative assessment of expected demand. In the Euro area the confidence continued to increase (+3).