The Business Climate Indicator (BCI) for the euro area improved further in December, and the Economic Sentiment Indicator (ESI) rose once again in December to 92.0 (+4.1 points) in the EU and to 91.3 (+2.5). It is their ninth consecutive monthly increase. But they remain at a low level.

The significant increase in the BCI reflects an across-the-board improvement in managers' assessments: the perception of the production trend observed in recent months and order books went up strongly, while the rise in export order books and production expectations were not as pronounced. The declining level of stocks confirmed further destocking.

As for the economic sentiment, the majority of Member States reported a general improvement in sentiment. Among the largest Member States, the UK reported a sharp increase (+8.2 points), followed by France (+4.1), while the improvements were less marked in Italy (+2.9), Germany (+1.7) and Spain (+1.2). Sentiment in the Netherlands remained unchanged and decreased slightly in Poland (-0.6).

Sentiment in industry, which increased by 3 points in both the EU and the euro area, remained the main contributor to the overall improvement. While most respondents in this sector reported strong improvements in their order books, they appear to have scaled back their production expectations. The declining level of stocks, especially in the automotive sector, confirmed further destocking.

Services increased by 1 point in the euro area and by 6 points in the EU, the latter owing to a strong increase in UK services sentiment. Confidence among consumers improved by 1 point in both areas, as unemployment fears faded. Mirroring this outlook, employment expectations picked up in industry and services. No major development was noted in retail, which remained unchanged in the EU and increased by 1 point in the euro area. Construction declined by 1 point in the EU and by 2 points in the euro area.

Confidence in financial services – which is not included in the ESI – remained broadly unchanged in the EU and declined by 2 points in the euro area, where managers' assessment of the business situation over the past three months was significantly more negative than in last month's survey.