Euro zone sentiment improves in July, but EU down on Brexit

Euro zone economic sentiment improved in July, defying market expectations of a decline, but economic sentiment in the wider 28-nation European Union fell in reaction to Britain’s vote to leave the EU, the European Commission said on Thursday.

The Commission’s economic sentiment indicator for the 19 countries sharing the euro currency rose to 104.6 in July from 104.4 in June, against market expectations of a fall to 103.7.

The business climate index, pointing to the phase of the business cycle, also increased sharply to 0.39 from 0.22, defying expectations of a decline to 0.17.

But sentiment in the wider bloc, which includes non-euro zone countries like Britain, fell to reflect a sharp decline in optimism in the wake of the 23 June British referendum to leave the EU.

“The decrease of the headline indicator for the EU (-0.9) was mainly due to the marked deterioration of sentiment in the largest non-euro area EU economy, the UK (-4.4),” the Commission said.

In the euro zone, sentiment improved in industry, services, retail trade and the construction sector. The only sector which saw more pessimism was consumer sentiment.

In the wider EU however, all sectors recorded a fall in sentiment except construction.

Economic sentiment in Britain plunged to 102.6 in July from 107.0 in June, with losses across all sectors. The most spectacular decline was the drop in sentiment among British consumers to -9.2 from -1.2 in June, followed by a 5.5 point drop in optimism in retail trade and a 3.9 point fall in industry.

Source: Reuters