Eurozone economic sentiment eased slightly in June ahead of the Brexit vote, the results off a survey by European Commission revealed Wednesday.
After rising for two straight months, the economic sentiment index slid marginally to 104.4 in June from revised 104.6 in May. The score was expected to remain at 104.7, unchanged from the initial estimate for May.
All survey results were collected before the announcement of the results of the UK referendum on EU membership on June 24.
Although the European Central Bank only began to implement its latest easing measures this month, the fall in the ESI supports the long-held view that further monetary easing is on the cards for the second half of 2016, Stephen Brown at Capital Economics, said.
The economic sentiment indicator suggests that the economy was performing moderately well and remains on track for growth of about 0.3 percent sequentially in the second quarter, Bert Colijn at ING Bank NV, said.
Nonetheless, indicators about economic sentiment prior to the Brexit verdict seem like tales from a distant past as the economic environment has been disrupted heavily by uncertainty surrounding the exit decision, the economist noted.
The industrial confidence index, the sector with the highest weight in the ESI, rose to a 6-month high of -2.8 from -3.7. It was forecast to rise to -3.4.
The improvement resulted from managers’ more optimistic production expectations and better assessments of the current level of overall order books.
On the other hand, the consumer sentiment index fell to -7.3 in June, as initially estimated, from -7 in May, as consumers’ assessments of the future general economic situation and their savings expectations deteriorated.
Likewise, the services sentiment index dropped to 10.8 from 11.3 in May. A slight easing of services confidence was the result of managers’ more pessimistic demand expectations, which were only partly counter balanced by modestly improved assessments of the past business situation/past demand.
Retail trade confidence weakened markedly to a 1-year low due to managers’ sharply deteriorating assessments of the present business situation and the adequacy of the volume of stocks. The corresponding index declined to 0.8 from 3.3.
Construction confidence eased in June as a consequence of managers’ more cautious views on the level of order books and employment expectations. The indicator fell to -18.2 from -17.7 a month ago.
Another report from the EU showed that the business sentiment came in at 0.22 versus 0.26 in May. Economists had forecast the score to remain unchanged at 0.26.
While managers’ production expectations and their appraisal of overall order books improved, the level of export order books, the stocks of finished products and, in particular, past production were appraised more negatively, the survey showed.
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