– Adds Results From Quarterly Surveys Of Industry And Consumers

July — MNI analysts survey — June Rev from
lowest median highest
———————————————————————
Econ Sentiment 87.9 88.0 88.8 89.6 89.9 —
Industry -15.0 -15.0 -13.8 -13.0 -12.8 -12.7
Services -8.5 -8.0 -8.0 -7.0 -7.4 —
Consumers -21.5 na na na -19.8 —
Retail -15.0 na na na -14.4 -14.9
Construction -28.4 na na na -28.1 —
———————————————————————
Business Climate: -1.27 na -1.00 na -0.95 -0.94

PARIS (MNI) – Eurozone economic morale eroded more than expected in
July, with a deterioration in all categories led by industry, the
European Commission said Monday.

After a 4.6-point slide since March, the Commission’s sentiment
index fell another two points in July to a 33-month low of 87.9 – 12.1
points below the long-term average.

The results suggest the economy is heading deeper into recession.
Whereas the composite PMI polls appear to have bottomed out just 0.4
point above May’s 35-month low of 46.0 and Belgian manufacturing
sentiment recovered somewhat this month, the fall in the Commission’s
overall index accelerated, a warning that the slump could drag on well
into the second half.

The larger core Eurozone countries were hit hardest in July, with
Germany down 3.7 points and France down 2.3 points. While Spain slipped
another 1.4 points, Italy regained 1.3 points and the Netherlands 0.6
point.

Industry morale fared worse than most analysts had expected,
weighed by weaker recent output and expected production, as well as a
more negative assessment of total and foreign order books and rising
stocks of finished products.

The quarterly supplement indicated a marked contraction in 2Q
manufacturing output, as capacity utilization fell from 79.7% in April
to 77.8% in July to stand 3.6 points below the long-term average.
Despite the depreciation of the euro, producers felt they were less
competitive in markets outside the Eurozone and were pessimistic about
future export volumes.

The Commission’s separate Business Climate Indicator also dropped
more than expected by 0.32 point to a 33-month low as well, with
declines in all components led by past production and export order
books.

Services sentiment also eroded more than expected to the lowest
level in nearly three years. While recent activity appears to have
stabilized, providers’ outlook for demand weakened markedly.

Morale in the financial services, by contrast, recovered in July
enough to retrace the 2.6-point drop in June. Respondents were less
dissatisfied with recent activity and less pessimistic about the near
term.

The Commission’s flash estimate for consumer sentiment was revised
up 0.1 point to show a 1.7-point monthly drop to -21.5 – also a nearly
three-year low, now 8.7 points below the long-term average. Households
were more worried about overall economic and labor market trends than
the future impact on their own financial situation. Yet they said they
were cutting back more on major purchases and planned to continue over
the coming year.

Nevertheless, the quarterly survey showed consumers somewhat more
willing to buy a car in the coming year, but less inclined to buy or
build a home or make home improvements.

Retailers were logically also more pessimistic about near-term
turnover, even though recent sales appeared to have stabilized at low
levels.

Construction morale, which had picked up somewhat in June, slipped
back slightly in July, mainly reflecting a more negative assessment of
order book levels.

Hiring prospects weakened in industry, retail and the financial
services but stabilized in construction and recovered in services.
Selling-price expectations declined in industry and construction, while
rising in services and retail.

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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