European Union Industrial Confidence Indicator

Industrial Confidence Indicator describes the current evaluation of the development of EU manufacturing companies and expectations for the next quarter. The indicator is based on factor analysis involving surveys among the leading industry representatives. The sample size for the eurozone is about 20 thousand companies representing all sectors of the manufacturing industry in the eurozone. The number of companies per country is selected in accordance with the contribution of a particular country to the economy of the euro area.

It differs from the similar Business Climate Indicator in that it considers three variables, rather than five ones:

• The total number of current orders (more than sufficient, sufficient or insufficient);
• Current stocks (very large, normal for the current season, very small);
• Production volume in three months (whether production is expected to grow, fall or remain unchanged).

The index is seasonally adjusted. Respondents are asked to provide a qualitative evaluation of the above variables, rather than qualitative ones.

The Industrial Confidence Indicator is an indicator of the eurozone's production sector development. Due to its generalized nature, it reflects a relative picture of business conditions in the euro area. Economists consider it as one of the composite indicators of economic development. The BCI growth speaks of improvements in manufacturing sector conditions and is a leading indicator of production output. Investors interpret the index growth as a signal to increase investment.

Index changes usually have a weak and short-term effect on euro quotes. However, sharp movements of the index chart are usually seen as a serious indicator of changing economic conditions.