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Financial News: Eurozone Economic Confidence At 40-Month Low

Eurozone Economic Confidence At 40-Month Low

07/30/2019 - 08:11:00 (RTTNews)

(RTTNews) - Eurozone economic confidence weakened to a 40-month low as almost all components of the indicator deteriorated suggesting the weakness in economic activity in the currency bloc, survey results from the European Commission showed Tuesday.

The economic confidence index fell to 102.7 in July from 103.3 in June. This was the lowest since March 2016, when the reading was 102.3.

The decline reflected weakness across industry, services, retail trade and construction sectors in July.

The industrial sentiment indicator declined further in July, to -7.4 from -5.6 a month ago. Economists had forecast the score to drop moderately to -6.7.

The weakening resulted from managers' more pessimistic production expectations and views on the current level of overall order books.

Pessimistic demand expectations dragged down the services confidence index to 10.6 from 11 in June. The score was also marginally below the forecast of 10.7.

Meanwhile, the consumer sentiment indicator climbed, as initially estimated, to -6.6 from -7.2 in the previous month.

Households' positive assessments of their past financial situation and their expectations about the general economic situation helped the index to strengthen in July.

Confidence in retail trade re-entered the negative zone in July, with the indicator falling to -0.7 from +0.1 in June. Managers were more negative on the present business situation as well as on expectations.

At the same time, the construction sentiment index decreased to 5.0 in July from 7.6 a month ago. The marked decrease in construction confidence resulted from a sharp decrease in managers' employment expectations, and a strong worsening of their assessment of the level of order books.

Another survey from the EU showed that business confidence weakened in July. The business climate indicator fell markedly by 0.29 points to -0.12.

Managers' assessments of past production, their production expectations, as well as their views on overall and export order books deteriorated. Only their assessment of the level of stocks improved, data showed.

July's EC survey adds to evidence from PMI data published last week that the euro-zone economy will expand by a meager 1 percent or so this year, strengthening the case for ECB action sooner rather than later, Melanie Debono, an economist at Capital Economics, said.

The bank is likely to cut rates at its next meeting in September and announce a fresh round of asset purchases in October, the economist added.

Eurozone GDP data is due on July 31. Economists forecast the economy to grow at a slower pace of 0.2 percent in the second quarter after rising 0.4 percent in the preceding period.

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