Euro businesses see sentiment improve in June

THE EUROZONE has seen an upswing in confidence over June, with a number of indicators released by the European Commission yesterday showing their best reading in over a year.

Though the confidence indices are still firmly negative, as the euro area suffers from a prolonged recession, the data showed that many parts of the economy have seen improvements.

The currency union’s economic sentiment indicator saw an improvement, rising from 89.5 in May to 91.3 in June. Any number below 100 indicates a generally negative opinion of the economy. Sentiment was last positive in mid-2011, but this month’s reading is the best since April 2012.

Some of the embattled European economies saw strong improvements: Spain, Italy and France, which are all still in recession, saw rises of 2.5, 1.7 and 1.3 respectively. The Netherlands and Germany saw rising sentiment too, ticking upward by 1.1 and 0.9.

Services confidence was the only part of the index that slipped, by 0.3. Industrial confidence improved marginally, and consumer confidence saw a rise for the seventh consecutive month. Consumers expect prices to increase, but only slightly.

Financial services confidence rose marginally. Business plans for employment were a mixed bag, with an upward revision for construction and a downward revision for retail.

The two largest European economies which do not use the euro, the UK and Poland, saw small declines in their business sentiment of 0.7 and 0.6 respectively

Ben May, European economist for Capital Economics, voiced caution: “Remember that the index has staged mini recoveries over the past couple of years that have subsequently reversed”. “The Eurozone economy remains fragile and there is no guarantee that the recent pick-up in sentiment will prompt the Eurozone as a whole to exit recession in the near term”, he added.

The Eurozone is currently in a protracted recession, having seen economic contraction for six consecutive financial quarters.