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Further Fall In Eurozone Consumer Confidence

James Boston
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Further Fall In Eurozone Consumer Confidence

The European Commission has just published the preliminary Consumer Confidence figures for the single currency bloc for the month of July. The headline reading has been announced at -8.4, this follows June’s report of -7.5% and market consensus was for no material change to this number today.

Consumer Confidence has been gradually growing within the Eurozone over the past 18 months, despite trending in the right direction it does however remain at a depressed level. More to the point the rate at which both consumer and business sentiment has been returning to the Eurozone is deteriorating.

There are signs of growth within the bloc, this growth however is far from ideal on three levels. Firstly, it is frail growth, too small to be put into the slow and stead category, the average quarterly GDP growth rate for the Eurozone is marginally above 0.2% over the past 2 years. Secondly, it is fragile growth, small shocks that can be expected to hit any economy have had the effect of sending capital running from the bloc, albeit when this occurs it tends to be a temporary effect. Finally, it is disparate growth, Germany which is the largest economy in the Zone is posting stable GDP expansion, France in second place appears to have flat lined in the growth department, while the third largest economy, Italy, is now posting GDP contraction.

Recent manufacturing figures across the bloc have undergone a sharp down turn, a sector that looked like it would lead the Eurozone recovery is now only posting an annual gain of less than half a percent thanks to a significant 1.1% fall in the reading last month. This combined with persistently low inflation and a stubbornly high unemployment level casts dark clouds over the Eurozone recovery. There is now nowhere for the European Central Bank to go with conventional monetary policy instruments, a version of quantitative easing is at this stage all but inevitable.

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