Eurozone Economic Confidence Slumps to Three-Year Low

Manufacturing sector is very weak.

Confidence in the combined economy of the 15 nations sharing the euro slumped to a three-year low point in June, according to a widely-watched EU survey released on June 27.

The European Commission's eurozone economic sentiment indicator dropped to 94.9 points in June from a revised 97.6 points the previous month, with consumer confidence sharply down and the manufacturing sector noticeably weak. It was the lowest the indicator had fallen since May 2005.

"Rising energy and food prices, the ongoing credit crunch, belief that the ECB is set to raise interest rates... and concerns about the global economic outlook are all weighing down on business and consumer confidence across the eurozone," said Global Insight chief economist Howard Archer." There was a particularly large deterioration in consumers' willingness to make major purchases at present," he said.

Spain registered the biggest fall among the larger eurozone countries, while declines were more moderate in France, Germany and Italy. "Spanish households are cutting down on spending amid rising unemployment, a cooling housing market and the run-up in consumer prices," said Lavinia Santovetti from Lehman Brothers Global Economics.

Confidence in the economy of the broader 27-nation EU also followed the downward trend, slipping 2.5 points in June from May to 94.6, the survey showed.

The European Commission's separate monthly business climate indicator for the eurozone also declined, dropping to 0.14 points in June from 0.58 in May.

Copyright Agence France-Presse, 2008

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