July — MNI analysts survey — June Revised
lowest median highest from
————————————————————————
Econ Sentiment 101.3 97.2 99.1 100.0 99.0 98.7
Industry -4 -6 -6 -5 -6 —
Services +6 na na na +4 —
Consumers -14 na na na -17 —
Retail -4 na na na -6 —
Construction -29 na na na -30 —
————————————————————————
Business Climate: +0.66 na na na +0.40 +0.37

PARIS (MNI) – Economic morale in the Eurozone surprised on the
upside again in July, with gains across all sectors, the European
Commission said Thursday.

After a largely unexpected 0.6-point upturn in June, the
Commission’s sentiment indicator jumped 2.3 points in July to 101.3, the
highest level since March 2008.

The good news follows a series of upbeat indicators that show
activity gaining momentum at the start of 3Q, suggesting that the
slowdown widely expected as stimulus measures begin to unwind may be
later or even milder than feared.

Most analysts had expected at best a modest improvement in
sentiment, given the lingering tensions from the sovereign debt crisis
and the intensification of austerity programs in many Eurozone
countries.

Among the largest Eurozone countries, the strongest monthly gains
were registered in Germany (+4.0 pts), followed by France (+2.6) and
Italy (+1.7) and the Netherlands (+1.2). Sentiment eroded in Spain
(-2.2).

Industry sentiment gained two points in July to stand four points
above the long-term average. Producers’ assessment of recent activity
and total order books improved markedly (+5 pts), flanked by strong
foreign orders (+3). Firms said orders on hand would assure 3.2 months
of activity, up from 3.0 months in April, and they expected stronger
exports ahead.

Manufacturing output prospects improved less (+1) but were still
well above average. Manufacturing capacity utilization climbed from
75.5% in April to 77.4% in July, still nearly four points below average.

The Eurozone flash factory PMI bounced back 0.9 point in July to
56.5 on the back of stronger output and orders.

The Commission’s separate Business Climate Indicator was also
firmer in July (see below).

As in industry, the improvement in service sector sentiment was due
mainly to stronger recent activity (+3) and demand (+4), while near-term
expectations improved only modestly (+1).

Confidence in financial services, which is not included in the ESI,
bounced back three points in July, boosted by a marked pick-up in recent
activity and employment. However, near-term demand prospects eroded
somewhat.

The Eurozone flash services PMI regained half a point in July to
56.0.

As indicated by the Commission’s flash estimate, consumer sentiment
rose another three points in July after a one-point upturn in June to
stand just one point below the long-term average. The gain reflected
mainly a higher assessment of recent economic activity (+6) and
prospects for the year ahead (+6), which had eroded sharply with the
intensification of the sovereign debt crisis in May.

However, while consumers said their financial situation had
improved slightly (+1) and expected the trend to continue over the
coming 12 months (+1), they said they had reduced outlays on big-ticket
goods (-2) and planned to retrench further in the year ahead (-1).

Retailers said recent activity had recovered slightly (+1) and
expected stronger turnover in the near term (+3).

The more modest recovery in construction sector sentiment was
driven mainly by fuller order books (+1), which offset a slowdown in
recent activity (-1).

Sales price expectations were unchanged in retailing, eroded
slightly in industry (-1), firmed in the services (+1) and in
construction (+4).

Hiring prospects improved in all sectors, led by industry and the
services (+3) and retailing (+2).

The Commission’s separate Business Climate Index rose 0.26 point in
July to a 28-month high of +0.66. While producers’ assessment of recent
output and orders improved, their outlook for the near term was
“cautious,” the Commission said.

“The improvement in the indicator suggests that economic activity
in industry will continue to recover in the coming months, although it
has still some way to go to reach its pre-crisis level,” it added.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

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