June — MNI analysts survey — May Revised from
lowest median highest
———————————————————————–
Econ Sentiment 105.1 103.0 104.5 105.5 105.5 —
Industry 3.2 2.0 2.7 3.5 3.8 3.9
Services 9.9 8.6 8.9 9.0 9.3 9.2
Consumers -9.8 na na na -9.9 -9.8
Retail -2.4 na na na -2.4 -2.5
Construction -23.6 na na na -24.7 -24.6
———————————————————————–
Business Climate: +0.92 +0.80 +0.87 +0.95 +0.98 +0.99

FRANKFURT (MNI) – Economic morale in the Eurozone eroded less than
generally expected in June, as modest recoveries in services, consumer
and construction sentiment partially offset further declines in
industry, the European Commission said Wednesday.

After at 2.5-point slide since February, Commission’s sentiment
indicator slipped another 0.1 point to an eight-month low of 105.1.

Alongside the slippage in other leading indicators, this clearly
points to a loss of economic momentum since the pick-up in 1Q. The
Eurozone composite PMI hit a 20-month low in June, while Belgian
National Bank’s sentiment index took a third tumble last month.

In the Commission’s survey, most of the larger economies sustained
further declines in sentiment, led by the Netherlands (-3.8 points).
While France (-0.9) and Germany (-0.6) also suffered losses, the
sentiment indicators for the Eurozone’s two largest economies remain
above their respective long-run country averages.

Conversely, economic sentiment recovered in both Spain (+2.6) and
Italy (+1.8).

Selling price expectations were revised downward in all sectors of
the Commission’s survey. The June PMIs signalled a further slowdown in
input prices from the record rate in February. While factory-gate
inflation slowed to a six-month low, services fees accelerated somewhat.

Consumers also cut their price expectations in June, knocking the
Commission figure to its lowest level since January.

Industry morale continued to deteriorate in June, though by less
than expected, to 3.2, a seven-month low. Declines were noted in
production expectations and export orders, though overall order books
were assessed less negatively.

The Commission’s separate Business Climate Indicator also surprised
to the upside, falling to +0.92 in June from a downwardly-revised +0.98.
Nevertheless, the indicator reached a nine-month low, reflecting lower
production expectations, poor export order books and less optimistic
employment expectations.

“The current level of the indicator remains very high, but the
consecutive drops observed may suggest that euro-area industry has
entered a phase of growth moderation,” the Commission said.

The Eurozone factory PMI has dropped six points since April to an
18-month low in June (52.0), with output growth sluggish (52.4) and new
orders stagnant (49.6).

Sentiment in the services unexpectedly recovered, with respondents
revising up their assessments of the recent business and demand outlook.
Demand over the next three months was viewed less optimistically, though
the drop in that sub-indicator was marginal.

Confidence in financial services, which is not seasonally adjusted,
continued to fall, reaching its lowest point since October, only
slightly above the long-run average. Firms were less optimistic
regarding both the current business situation and their three-month
outlook. A smaller proportion expected demand to improve over the next
quarter.

The services are usually less sensitive to cyclical swings than
industry. This has also been the case for the PMIs, which have slipped
three points from their peak in March to a six-month low in June (54.2).
New business (53.8) has so far held up better than in industry.

The Commission’s flash estimate for consumer sentiment was revised
up 0.2 point to -9.8, while May’s figure was revised down to -9.9 from
-9.8. With sentiment 2.6 points above the long-run average, consumers
appeared more optimistic regarding their financial situation over the
next year. They were also mildly more upbeat regarding the economic
outlook in general, though jobless fears were unchanged.

As households’ revised down their assessment of price trends, they
lowered their savings outlook, the Commission noted. Conversely,
consumers revised up the likelihood of making major purchases over the
next 12 months, though the sub-indicator remains well below the series
average.

Retail sentiment was unchanged in June at -2.4, while May’s figure
was revised up slightly. For the first time since February, a majority
of respondents saw improvements in the present business situation. A
majority of retailers also expected their situation to improve in the
near term, though this proportion continued to shrink, hitting a
10-month low.

After a brief dip in May, construction sector morale resumed its
upward trend in June, as order books and employment expectations
improved.

In May, the Commission projected Eurozone GDP growth at 1.6% this
year and 1.8% next year. Average HICP inflation was seen peaking at 2.6%
this year then slowing to 1.8% in 2012.

— Frankfurt bureau: +49 69 720 142; E-mail: frankfurt@marketnews.com —

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