Eurozone economic confidence deteriorated to a 32-month low in June as the unresolved debt crisis and economic downturn weighed heavily on sentiment, a European Commission report revealed Thursday.
The economic confidence index fell to 89.9, the lowest since October 2009, from 90.5 in May, according to a closely-watched monthly survey from the executive arm of the EU.
Falling confidence in industry, services and, to a lesser extent, among consumers was counterbalanced by improving confidence in retail trade and construction.
Due to a deterioration in managers' production expectations and their assessment of the current level of overall order books, industrial confidence dropped to -12.7 from -11.4 in May. An indicator of services confidence fell to -7.4 from -5.2 in the previous month.
On the other hand, confidence in retail trade rebounded to -14.9 from -18.1 a month ago. Confidence also recovered in construction, to -28.1 from -30.2 in May.
Confidence among consumers, meanwhile, declined slightly by 0.5 points to -19.8, based mainly on worsened expectations about the future general economic situation and increased unemployment fears in both regions.
In a separate report, the commission said business confidence worsened to -0.94 in June from -0.79 in May. The reading was weaker than the -0.87 expected level. The decline was mainly driven by a more negative assessment of production expectations, past production, overall order books and export order books.
IHS Global Insight's economist Howard Archer said the further decline in business and consumer confidence in June piles yet more pressure on the European Central Bank to take interest rates lower. The economist expects bank to respond by trimming them to 0.75 percent from 1 percent at their July 5 policy meeting.
European leaders will gather for a two-day summit in Brussels later today. They will try to reach a breakthrough to stem the debt crisis after Spain and Cyprus requested EU aid.
However, economists say policy makers are set to disappoint again. Capital Economics expects little of substance to emerge from the latest summit.
by RTT Staff Writer
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