Eurozone economic confidence declined unexpectedly in May from a near decade high on weak services and retail sentiment, yet remained strong enough to signal a pick up in the growth momentum.
The economic confidence index declined to 109.2 in May from a revised 109.7 in the previous month, survey results from the European Commission showed Tuesday.
The score was forecast to improve to 110 from April’s initial reading of 109.6, which was the highest since August 2007.
The moderation in sentiment resulted from decreases in services and retail trade confidence, while confidence in industry, construction and among consumers remained broadly stable at high levels.
Despite softening in May, the business and consumer surveys suggest that euro area economic growth picked up in the second quarter, Stephen Brown, an economist at Capital Economics, said.
With few signs of inflationary pressure building, the economist expects the European Central Bank to continue asset purchases into 2018 and keep interest rates at current levels until 2019.
The industrial sentiment index rose to 2.8 from 2.6 a month ago. Economists had forecast the indicator to rise to 3.1.
Broadly stable developments in industry confidence resulted from managers’ more optimistic production expectations as well as improved assessments of current levels of overall order books being partly offset by worsened appraisals of the stocks of finished products.
Meanwhile, the services confidence indicator dropped to 13.0 from 14.2 in April. Declining services confidence reflected a worsening of all three components, namely managers’ assessment of past demand, the past business situation and demand expectations.
Likewise, the retail trade confidence index fell to 2.0 from 3.1 in April. The decrease in retail trade confidence was caused by managers’ lower appraisal of both the present and the expected business situation.
The construction sentiment index climbed to -5.7 in May from -6.0 in April. Data showed that robust construction confidence resulted from a strong upward revision in managers’ employment expectations being partly offset by a marked decrease of their assessment of the level of order books.
By contrast, the consumer sentiment index improved to a near decade high of -3.3 in May, in line with the flash estimate released on May 19. The score was -3.6 in April.
Robust consumer confidence reflected households’ broadly unchanged savings expectations and views on their future financial situation, while their assessment of both the general economic situation and unemployment in the months ahead turned more positive.
Another report from EU showed that the business climate index dropped to 0.90 in May from 1.10 in April.
The correction was driven by managers’ sharply worsened assessment of the past production and the stocks of finished products. On the other hand, managers’ production expectations and their views on overall order books and export order books improved in May.
The material has been provided by InstaForex Company – www.instaforex.com
May 30, 2017 at 05:52PM
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