The Business Climate Indicator (BCI) for the euro area registered a strong increase in December 2010, the European Commission’s Economic and Financial Affairs directorate said on January 6 2011.
 
"The level of the indicator is approaching its historical peak reached in spring 2007, suggesting that the recovery in industry will continue in the coming months," according to the directorate.
 
The rise in the BCI is due to a broad-based improvement in sentiment among managers in industry who reported, in particular, significant increases in overall order books and in production trend observed in recent months.
 
Managers' assessment of export order books and production expectations improved strongly as well.
 
Stocks of finished goods continued to decline and now stand at a very low level by historical standards, according to the Economic and Financial Affairs directorate.
 
In December, the Economic Sentiment Indicator (ESI) improved further in both the EU and the euro area.
 
The indicator increased significantly, climbing by one point to 106.1 in the EU and by 1.1 points to 106.2 in the euro area. These results were driven in particular by strong positive readings in France and Germany.
 
Most EU member states reported an improvement in sentiment.

Among the seven largest EU states, only Spain registered a decrease (-0.9). France registered the most significant increase (2.5), followed by the Netherlands (2.4), Germany (1.5) and Poland (1.3), while improvements were less pronounced in Italy (+0.8) and the UK (+0.7).

In Germany, France, the UK, the Netherlands and Poland the ESI is above its long-term average.

Sentiment in industry, which increased sharply by 3.6 points in the EU and by 3.3 points in the euro area, was the main contributor to the overall improvement in confidence.
 
The gain in industry was broad-based; reflecting improvements across all the components of the confidence indicator and strong positive developments in all the largest EU states.

Further, sentiment in the retail sector improved substantially in both the EU (+5.5) and the euro area (+6.1), backed by pronounced gains in managers' assessment of the present business situation. In the EU, the indicator reached its highest historic level.

In line with the flash estimate released on December 20 2010, confidence among consumers fell, both in the euro area (-1.6) and, to a lesser degree in the EU (-1.1). 
 
The drop in confidence mirrored in particular a significant worsening of consumers' assessment of the general economic situation and a rise in unemployment fears.
 
After a sharp increase in November, confidence in services fell back in both the EU (-1.8) and the euro area (-0.5).
 
Most respondents in this sector reported more downbeat assessments of demand and the business situation over the past three months.

Among the largest member states, only France continued to report improving sentiment in services. Sentiment in construction remained broadly stable at very low levels in both regions (+0.4 the EU and 0.0 in the euro area).

Confidence in financial services – not included in the ESI – improved strongly further in both the EU and the euro area (+5.3 and +4.5 points, respectively).