BRUSSELS: Confidence in the Eurozone’s economy slipped in June after a strong start to the year, an early sign that the threat of default in Greece may be starting to dampen economic morale in the bloc.
The European Commission’s monthly economic sentiment indicator was 103.5, down versus May and slightly worse than the 103.8 forecast by economists in a Reuters poll. Business morale fell to 0.14.
Weeks of uncertainty surrounding Greece’s have intensified dramatically after the breakdown of talks between Greece and its creditors, meaning Athens may fail to make 1.6 billion euro debt repayment to the IMF on Tuesday.
While the Commission’s survey was conducted before the weekend collapse in negotiations, business managers were now more pessimistic about the Eurozone’s economy, particularly in industry and in the retail sector.
“The mild decline of euro-area sentiment resulted from a slight decrease in confidence in industry and a more important drop in retail trade,” the Commission said in a statement.
Morale dropped 2.0 points in Spain, by 0.2 points in France and stagnated in Germany, the bloc’s biggest economy.
Italy surprised by reporting a 0.8 per cent increase in economic confidence, which was likely linked to optimism about the progress in Prime Minister Matteo Renzi’s reform agenda.
Despite the fall in overall sentiment, economists still see a broad recovery in the Eurozone and the Commission survey showed stable consumer and services confidence, as well as rising construction and financial services morale in June.
Arguably most positive for the European Central Bank, which launched a money-printing programme this year, the European Commission said consumers’ inflation expectations rose for a fifth straight month in June, jumping to 4.8 from 3.6 in May.
That would suggest the threat of deflation, a concern at the start of the year, is now receding.
