Eurozone business confidence picks up as bloc stages recovery
Eurozone businesses became more confident about the economy in August as the bloc gradually recovered from the fallout of the coronavirus pandemic, according to new survey data.
The closely watched Eurozone economic sentiment indicator rose 5.3 points to 87.7 in August, the European Commission said today. However, sentiment remained well below its long term average, which equals 100.
In the all-important services sector, companies became markedly more optimistic. The Commission said this was driven by higher demand.
Yet consumer confidence was virtually unchanged this month. People said their intentions to make big purchases and perception of their current financial situation were roughly the same as in July.
It comes as the Eurozone economy gradually reopens after some of the strictest lockdowns in the world.
Coronavirus has battered the bloc, with GDP dropping a record 9.7 per cent in Germany in the second quarter and 13.8 per cent in France. Overall, the Eurozone economy shrank by 12.1 per cent in the second quarter.
Signs that Eurozone recovery is slowing
Melanie Debono, Europe economist at consultancy Capital Economics, pointed out that the rise in the headline sentiment index was smaller than in the previous two months.
“This adds to the evidence that while the economy was probably still expanding, it has slowed sharply compared to June and July,” she said.
There were other signs that the recovery is slowing down. Services firms’ expectations of future demand slipped for the first time in four months and confidence in the construction sector fell slightly.
However, confidence among firms in the retail sector grew relatively rapidly, boding well for the bloc’s consumer-driven economies.
Debono said Capital Economics does not think the Eurozone will reverse its second-quarter drop in the third quarter.
“We remain happy with our forecast that Eurozone GDP will contract by around 7.5 per cent over 2020 as a whole.”