Euro Area: Economic sentiment at all-time high in July, amid easing restrictions and mounting price pressures

Euro Area Economic Sentiment June 2021

Euro Area: Economic sentiment at all-time high in July, amid easing restrictions and mounting price pressures

Sentiment in the Eurozone climbed to 119.0 in July from 117.9 in June, marking the strongest reading since records began back in 1985. The index therefore moved further above its long-run average of 100 for the third time since the outbreak of the Covid-19 pandemic. July saw improvements in sentiment in the services and industrial sectors. However, the retail and construction sectors recorded a slight dip in confidence, and consumers grew less confident, ending a 5-month rally. Meanwhile, employment expectations were unchanged. Lastly, selling price expectations continued to increase markedly in all sectors and consumer price expectations climbed to the highest level since September 2012.

In terms of specific countries, sentiment rose the most in France and it also gained considerable strength in Italy and Spain. Germany saw a limited rise in sentiment, while the Netherlands recorded a decline in confidence.

Commenting on the release, Bert Colijn, senior Eurozone economist at ING, stated:

“The increase in sentiment from 117.9 to 119 in July was better than expected and confirms the view of a strong rebound in economic activity. The reopening of economies is boosting service sector activity, and manufacturing continues to perform strongly. The two main risks to the outlook are the increasing impact from supply chain problems in manufacturing and the surge of the Delta variant for services. The ESI did provide some colour on these two risks.”

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