Expectations for EU's economy improved in October while in Croatia they deteriorated considerably, reflecting a wave of pessimism in the services sector and industry, according to the latest Economic Sentiment Indicator (ESI) report issued by the European Commission on Thursday.

In October 2021, the ESI in Croatia went down by 3.3 points on the month to 109.4 points, the commission reported.

Confidence deteriorated the most in the services sector and industry, with a drop of 5.7 and 4 points respectively.

Retail trade confidence saw the slightest decrease of 0.9 points.

Construction confidence remained almost unchanged with an increase of just 0.1 points.

Business leaders have adapted their plans on hiring due to the subdued forecasts in the coming period, resulting in a 1.9 point decrease of the Employment Expectations Indicator (EEI) on the month to 109.6 points, a record low since May.

This is the first time the Commission released data referring to the Economic Uncertainty Index (EUI) and in Croatia this index increased by 1.9 points m-o-m to 4.4 points, reflecting the increased level of uncertainty with regard to economic trends in the coming period.

The Economic Uncertainty Index is constructed as a weighted average of the perceived uncertainty as reported by managers in the four surveyed business sectors (i.e. industry, services, retail trade and construction), as well as consumers.

Improvement in EU and euro area

In October 2021, the Economic Sentiment Indicator (ESI) picked up in the EU by +1.0 points, to 117.6 points.

In the euro area, it increased by 0.8 points to 118.6 points.

Services confidence increased the most by 2.8 points in the EU and 3 points in the euro area.

Construction confidence was strengthened with an increase of 1.5 points in the EU and 1.4 points in the euro area.

Retail trade confidence edged up by 0.6 points in both the EU and euro area.

Industry confidence remained broadly unchanged (+0.3) at its second-highest reading on record, and increased by a mild 0.1 points in the euro area.

Consumer confidence weakened (-0.9) in the EU and (-0.8) in the euro area, reflecting households’ more negative views on their past and future financial situation, as well as the expected general economic situation.

The European Commission’s new Economic Uncertainty Indicator (EUI) stayed virtually unchanged (-0.1 points to 14.0), still at a high level compared to pre-pandemic levels.