The broad index measuring the overall activity of the European economy is called the Economic Sentimental Indicator (ESI). It is released each month by the Directorate General for Economic and Financial Affairs of the European Commission.
The ESI gives three separate economic figures each covering different economic, geographic, and political entities. There is one statistic for every member of the European Union, one for the overall European Union, and one for the Euro Zone.
Every 3-4 years, the European Commission selects different institutes across Europe to partake in the surveys. These selected institutes then send questionnaires to both business and consumers in each European country.
1 = negative response
5 = unchanged response
9 = positive response
Once the numbers are in, a formula is used to transform these numbers into balance. When the number is released, individuals and governments focus on the on the difference between the percentage of positive responses vs. negative responses.
The ESI is an index measuring 5 separate sectors of the economy. Each sector has a specified weight within the index:
Industrials – 40%
Service – 30%
Consumer – 20%
Construction – 5%
Retail trade – 5%
Understanding the Numbers:
- A reading of 100 is the long term average of the ESI
- If the figure comes in below 100, this signifies a decline in economy. In this case the traders might encourage the selling of the Euro.
- If the figure comes in higher than 100, this signifies a robust economy and should cause the Euro to appreciate.
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