Deteriorating Economic Outlook: EU and Bulgaria Face Decline in Business and Consumer Sentiment

The latest European Commission survey reveals a decline in both economic and consumer sentiment across the European Union, with Bulgaria showing a similar trend by the end of 2024. The Economic Sentiment Indicator (ESI) in the euro area decreased sharply to 93.7 points in December, down from 95.6 points in November. This represents the lowest level since November 2020. The ESI also dropped within the EU as a whole, falling to 94.5 points from 96.2 points the previous month, marking the lowest level since October 2023. Both indicators have now fallen below their long-term averages.

The drop in sentiment is largely attributed to weaker business confidence, particularly in industry, construction, and consumer sentiment, although retail trade showed signs of stabilization, and there was slight improvement in the services sector. Among the largest EU economies, France saw the steepest decline in ESI, dropping by 3 points, followed by Germany with a decrease of 2.5 points and Italy, down 1.1 points. In contrast, Spain saw a modest increase of 0.9 points, while Poland experienced only a slight drop of 0.1 points.

Consumer confidence in the EU also worsened in December, with the indicator falling to -13.4 from -12.4 points in November, reaching an 8-month low. In the euro area, the drop was more pronounced, with the indicator slipping to -14.5 points from -13.8. This marks the lowest point since April 2024. Similarly, the employment expectations indicator (EEI) for the EU decreased to 98.4 points from 99.4 points, and in the euro area, it fell to 97.3 points from 98.7 points. The decline reflects less optimistic employment plans, particularly in industry, construction, and services, while retail trade saw some improvement.

At the same time, expectations for future selling prices rose across all sectors, with the largest increases observed in construction and services. Consumer price expectations for the coming year also surged for the third consecutive month.

In Bulgaria, the economic sentiment index showed a modest decline in December, falling to 106.2 from 106.3 points in November, marking its lowest level since August 2024. Business sentiment in Bulgaria was notably weaker in industry, with the relevant indicator dropping from 2.4 to 1.7 points. However, the services sector, construction, and retail trade showed improvements, with indicators rising to 13.0, 0.3, and 12.8 points, respectively.

Consumer confidence in Bulgaria followed the general EU trend, declining to -20.4 points in December from -18.2 points the previous month, marking a multi-month low. In contrast, Bulgaria's Employment Expectations Indicator rose to 117.2 points in December, up from 115.4 points in November, diverging from the broader EU trend where this indicator fell.

The European Commission also reported a rise in economic uncertainty across the EU in December, with the uncertainty indicator increasing to 19.1 points from 18.0 points. Within the eurozone, it rose to 19.7 from 18.6 points. In Bulgaria, however, the economic uncertainty indicator surged to 4.1 points from 1.5 points, reflecting a significant rise in uncertainty for the country.

Source: European Commission