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Euro zone Economic Sentiment Falls for Eight Consecutive Month in August

Poor optimism in industry and services has pulled down Eurozone economic sentiment for an eighth consecutive month in August, stated a monthly survey by European Commission on Thursday (30).

According to the figures released, the Economic Sentiment Indicator (ESI) decreased slightly in the 19 member countries euro area by 0.5 points to 111.6 from 112.1 recorded in July, while it remained stable in the European Union at 112.3 in August.

“The decrease in the euro-area sentiment indicator resulted from a marked deterioration of confidence among consumers and a milder decrease in the services sector, which were only partly offset by increases in the retail trade and construction sectors,” European Commission said.

Confidence in the industry sector remained broadly stable. Amongst the largest euro-area economies, the economic sentiment indicator (ESI) remained virtually unchanged in Germany (-0.1), while it decreased in France (-1.3), Italy (-0.8), Spain (-0.7) and the Netherlands (-0.5).

Broadly flat developments in industry confidence (-0.3) reflected managers’ more optimistic production expectations almost offsetting the worsening in their assessment of the current level of overall order books and the stocks of finished products.  Of the questions not included in the confidence indicator, managers’ views on both export order books and past production deteriorated, with the worsening of the latter being particularly strong.

The marked decrease in consumer confidence (-1.4) was mainly due to a deterioration in consumers’ assessment of the future unemployment, while consumers’ views on their future financial situation, the future general economic situation, and their savings expectations remained broadly stable, the EU commission said.

The marked rise in retail trade confidence (+1.4) was fuelled by more positive views on the present business situation and the adequacy of the volume of stocks, while managers’ assessment of the expected business situation remained virtually unchanged. The increase in construction confidence (+1.0) resulted from upward revisions in both managers’ employment expectations and their assessment of the level of order books.

As in the euro area, EU managers reported a strong upward change in their employment expectations in services and construction and a mild deterioration in industry. Contrary to the euro area, employment expectations improved also in the retail trade sector. Price expectations were up in line with the euro area for the industry and retail trade sectors; however prices in the EU were expected to remain broadly stable in construction and decrease slightly in services. EU consumers’ prices expectations increased markedly.