The Business Climate Indicator (BCI) for the euro area improved further in October 2009, its seventh consecutive increase, but the level continues to remain very low, suggesting that year-on-year growth in industrial production was still negative in September.
 
The significant rise in the BCI reflects an across-the-board improvement in managers' assessments: production expectations, the perception of the production trend observed in recent months, order books and export order books all went up markedly, the European Commission said.
 
Furthermore, managers viewed stocks of finished goods to be closer to appropriate levels, bringing the current reading to just below its long term average.

The Economic Sentiment Indicator (ESI) rose to 86.0 (+3.4 points) in the EU and to 86.2 (+3.4) in the euro area.

The improvement in October is the seventh consecutive increase in both series since the trough of March 2009. These levels, however, are still well below the respective long-term averages.

The industry sentiment, which rose by four points in the EU and by three points in the euro area, was the largest contributor to the overall improvement in both areas.
 
"While the respondents are clearly more positive in their appraisal of order books and the level of stocks, it was the much more optimistic production expectations that really lifted sentiment," the EC said.
 
The quarterly manufacturing survey confirms this positive development. Firms are using their capacity at a slightly higher pace than in the summer (the reading now stands at 71.4 per cent in the EU and 70.7 per cdent in the euro area), although utilisation rates are still far below their respective averages.
 
Participants in the survey reported significant improvement in new orders received in the past three months, and more favourable expectations about export orders in the next three months.
 
The majority of EU member states registered an improvement. Among the largest member states, Italy (+3.8), Germany (+3.4), the UK (+3.2) and France (+3.0) posted significant increases in sentiment, while the rise was more moderate in Poland (+2.3.), Spain (+1.9) and in the Netherlands (+1.1).
 
Confidence among consumers also improved, by two points in the EU and by one point in the euro area, mainly driven by more optimistic general economic outlook.
 
Confidence in services increased by two points in the euro area, while it remained unchanged in the EU, mainly due to falling confidence in the UK.
 
Construction continued to rise at a steady pace (+1 for both sectors in the EU and the euro area). Retail Trade remained unchanged in the euro area but declined by one point in the EU.
 
Confidence in financial services – not included in the ESI – stabilised in both regions after the strong increase recorded in September, reflecting a slight improvement in the business situation, while expectations of demand decreased marginally.