August — MNI analysts survey — July Revised
lowest median highest from
————————————————————————
Econ Sentiment 101.8 100.5 102.0 103.0 101.1 101.3
Industry -4 -5 -3.5 -2 -4 —
Services +7 na na na +6 —
Consumers -11 na na na -14 —
Retail -4 na na na -4 —
Construction -29 na na na -29 —
————————————————————————
Business Climate: +0.61 na na na +0.63 +0.66

PARIS (MNI) – Much as expected, economic morale in the Eurozone
improved further in August, though gains were limited to the services
and consumer confidence.

After a largely unexpected 2.7-point recovery since May, the
Commission’s sentiment indicator gained another 0.7 point in August to
101.8, the highest level since March 2008.

The good news follows a series of indicators that point to
continued dynamic economic activity in 3Q, suggesting that the slowdown
widely expected as stimulus measures begin to unwind may be milder or at
least come later than feared.

Among the largest Eurozone countries, the strongest monthly gain
was registered by Germany (+1.1 pts), followed by Spain (+0.9) and
France (+0.4). Sentiment eroded in Italy (-0.9) and especially in the
Netherlands (-2.1).

Industry sentiment was unchanged in August, disappointing most
analysts’ hopes for a further modest improvement. However, there were
further gains in forward-looking components, including expected output
(+1), order books (+2) and export order books (+3). Inventories were
somewhat higher and other components little changed. Sales price
expectations improved (+1), while employment prospects were unchanged.

By contrast, the Eurozone flash factory PMI fell 1.7 points in
August to a six-month low of 55.0 as both output and new orders lost
some momentum. Still, the average of the output components for July and
August was only 0.8% below the 2Q average, when Eurozone industry output
expanded by a robust 2.5%.

The Commission’s separate Business Climate Indicator was marginally
weaker in August (see below).

The one-point rise in service sector sentiment reflected mainly
higher expectations for demand (+2) and prices (+1). Providers also said
recent activity continued to improve (+1), despite some slowdown in
demand (-1) and employment (-1).

Confidence in financial services, which is not included in the ESI,
stabilized in August after a three-point rebound in July, as firmer
recent activity and brighter prospects for demand were offset by weaker
recent demand trends and recent and expected hiring.

The Eurozone flash services PMI eased 0.2 point in August to 55.6,
remaining withing the range seen since April.

As indicated by the Commission’s flash estimate, consumer sentiment
remained on a solid upward trend, rising another three points after a
four-point recovery since May, surpassing the long-term average by two
points. The rise in August was driven mainly by a much improved
assessments of overall economic activity (+8) and brighter expectations
for the coming year (+5). Unemployment was expected to declined over
next 12 months (-4).

As a result, consumers expected their financial situation to
improve further (+1), allowing them to spend more on big-ticket items
(+1) and put more money aside for the future (+1)

Retail sentiment stabilized on the month after a two-point rise in
July. A recent improvement in activity (+1) was offset by weaker order
plans (-1) and expectations for hiring (-1) and sales prices (-2).

Construction sector morale was also unchanged overall, as firmer
recent activity (+1) and fuller order books (+3) offset weaker prospects
for employment (-4) and prices (-1).

For the first time in 18 months, the Commission’s separate Business
Climate Index declined in August, slipping back 0.02 point to +0.61. The
decline was due mainly to a lower assessment of inventory levels, the
Commission explained. By contrast, producers’ view of order books,
especially for export, continued to improve, while their expectations
for production and employment were unchanged.

“The level of the indicator suggests that economic activity in
industry will continue to recover in the coming months, although it has
still some way to go to reach its pre-crisis level,” it added.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

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