EU Commission business and consumer survey results for July confirm that the Eurozone economy is stalling, as signalled by earlier monetary weakness. The “economic sentiment indicator” is a weighted average of confidence measures covering industry, services, retail trade, construction and consumers, with 100 representing the long-run mean (i.e. over 1990-2010). The Eurozone-wide indicator fell for the fifth consecutive month in July, reaching its lowest level since August.
The monthly decline in July was the largest since February 2009 and reflected weakness across economies, with Germany and Italy registering notable falls. The impression of recent Spanish resilience in the chart is misleading because of a methodological change in May that has raised the level of the indicator – otherwise it, too, would probably be at a new low for the year. The UK measure also softened last month but is little changed since January versus a big Eurozone decline.
Gathering economic weakness should head off further ECB tightening, thereby promoting much-needed euro depreciation.
