Eurozone economic sentiment tumbles in July

Economic sentiment in the eurozone tumbled in July as the Ukraine conflict and surging inflation took their toll.

The European Commission’s economic sentiment indicator fell to 99.0 from 103.5 in June, coming in below analysts' expectations of 102 and below the long-term average.

The largest declines were seen in industrial and services confidence, mainly due to a fall in orders, while the consumer confidence index fell by three points.

Households’ assessment of their past financial situation and their outlook on their future situation hit all-time lows, with intentions to make major purchases and expectations about the general economic situation falling to the lowest levels since April 2020.

The EC employment index dropped to 107.0 in July from 110.2 in June.

ING said: "High inflation and the soaring costs of energy are, of course, major headwinds. Unfortunately, the labour market, which had been a big support for consumption also shows signs of weakening.

"The employment expectations indicator, while still above its long-term average, fell for the fifth month in a row. In the consumer survey, unemployment expectations also increased. No wonder that the intention to make major purchases over the next 12 months is now close to an all-time low."

Economist Peter Vanden Houte added: "While we still believe that the European Central Bank will deliver an additional 50 basis points rate hike over the coming months, the spectre of a full-blown recession is likely to halt the tightening cycle before the end of this year."