Eurozone crisis as Germany, Italy drag on confidence – cracks showing in largest economies

Economic sentiment in the eurozone fell to its lowest point in nearly three years in June, with the largest losses reported mostly in Germany and Italy.

Fresh data from the European Commission showed its main indicator of economic confidence dropped to 103.3 points in June.

This is down from 105.2 a month earlier, reaching its lowest level since August 2016.

Germany bore the brunt of the losses, where the indicator fell by 2.9 points.

Italy saw confidence drop by 1.5 points.

France, the Netherlands and Spain also recorded losses in economic sentiment.

Sentiment in the industry sector plunged by 2.7 points, the largest drop in about eight years.

The service sector was also dented by a drop of 1.1 points, showing business managers are also feeling pessimistic. 

Consumer confidence went down by 0.7 points, but did not affect sentiment in the retail trade sector, which instead rose by 1.0 points.

The eurozone has been battling growing fears about slowing global growth and the impact of the hostile trade war between the United States and China. 

Highlighting the woes facing the euro area, disappointing data showed manufacturing activity contracted again this month in the bloc.

The factory PMI held well below the 50 mark separating growth from contraction, registering 47.8 compared to last month’s 47.7.

An index measuring output, which feeds into the composite PMI, dipped to 48.8 from 48.9.

Bert Colijn, a senior economist at ING, said: “The dichotomy between services and manufacturing is only getting larger.

“The big question remains for how long this can continue.”

Eurozone business activity remained weak in June, but nudged up slightly as it come in at its strongest level since November 2018.

Data last month showed IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI)went up to 52.1 this month from a final May reading of 51.8.

Earlier figures from Germany and France remained weak but surprised on the upside.

Andrew Kenningham, chief Europe economist at Capital Economics, said: “The small improvement in the flash PMIs for June will not be enough to deflect the ECB from its new plan to ease policy within the coming months.”

IHS Markit said the PMI pointed to GDP growth of just over 0.2 percent this quarter, below the 0.3 percent predicted in the Reuters poll.

source: express.co.uk