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Eurozone economic sentiment ticks down in July


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Eurozone economic sentiment ticks down in July

Economic sentiment in the eurozone decreased slightly in July from the previous month as an increase in confidence in the services sector was offset by decreases in industry and retail trade.

The economic sentiment indicator fell by 0.2 point to 112.1 in July from 112.3 in June, according to the European Commission, which called overall eurozone economic sentiment "broadly unchanged."

"July's very small fall in the [European Commission's] measure of economic sentiment supports our view that eurozone growth is slowing only slightly from a strong pace," said Jennifer McKeown, chief European economist at Capital Economics.

"The data support the [European Central Bank's] stance that growth will remain healthy but that the inflation outlook does not warrant any more than a very gradual and cautious removal of policy stimulus," McKeown said.

Confidence in the retail trade sector decreased by 0.8 point due to more pessimistic assessments of the expected business situation. Industry confidence posted a marked decrease of 1.1 points, resulting from managers' more negative assessments of production expectations, the current level of overall order books and stocks of finished products.

Meanwhile, services confidence increased by 0.9 point on a significant improvement in managers' demand expectations.

The rate of capacity utilization in the manufacturing industry is estimated to be 84.1% in the third quarter, down from 84.3% in the second quarter, according to a quarterly survey. The capacity utilization rate in the services sector is estimated to increase to 90.6% from 90.2%.

Separately, the business climate indicator for the eurozone fell to 1.29 in July from 1.38 in June as managers' assessments of overall and export order books worsened significantly from the previous month, while their production expectations and views on the stocks of finished products edged down. Managers' appraisals of past production improved from the previous month.

"Even though a trade war has far from been avoided, last week's meeting between U.S. President Trump and European Commission President Juncker at least cleared the air for the moment and could be positive for eurozone sentiment. The eurozone economy has shifted into a lower gear for now, but the expansion does not seem to be at risk," Bert Colijn, senior economist at ING Research, said.