ECONOMY

Business confidence falls in most EU member states

Brussels – The business confidence index in the eurozone declined by 0.19 points in July, despite indications of lower inflation, according to preliminary data released yesterday by Eurostat, the European Union’s statistics agency. The inflation data showed a drop in the harmonized inflation index used by the European Central Bank to an annual rate of 1.9 percent from 2 percent in June. Concerning the business confidence index, it has remained negative in the eurozone for the 26th month in a row, that is, since June 2001, when it turned negative for the first time since the excessive euphoria of the second half of the 1990s. On the other hand, there was a slight improvement in the confidence indices in construction and retail commerce as well as in the consumer confidence index. The latter helped produce a balanced Economic Sentiment Index across the eurozone. Bullish Greece In Greece, by contrast, there was a slight rise in the business confidence index, which had already increased significantly in June. Consumers appeared to have recovered their equanimity after a big drop in confidence in June, the biggest in the EU. The business confidence index is compiled by Eurostat on the basis of answers provided by a sample of European industrialists to a series of questions dealing with recent and future production trends, orders, export orders and finished product stocks. By sectors, the industrial confidence sector declined by 2 points in the EU as a whole, with the worst performances provided by Italy (with a 6 point drop), Sweden and Britain (4 points each) and Germany (2 points). The greatest increases were seen in Finland (8 points) and Ireland (4 points). In Greece the index rose by a point. This rise in Greece is partly explained by an increase in orders (5 points), the second largest in the EU behind France’s 6 points. Despite this increase, Greek businessmen believe things will not be so good in the future: the subindex of expected orders showed a drop of 2 points. Much darker, however, are the expectations of their Italian and Swedish colleagues, whose subindices of expected orders declined by 13 and 9 points, respectively. In Sweden, the index of actual orders declined by 13 points. Paradoxically, Sweden also shows the greatest decline in stock (10 points). In Greece, this subindex declined by a single point. The greatest increase was recorded in France (11 points) and Britain (5 points). On the consumer side, the confidence index increased by a single point both in the eurozone and the EU as a whole, while it was unchanged in Greece. Expectations of Greek consumers for the economic situation in 12 months, however, showed a slight decline (Eurostat does not specify how much). On the other hand, Greek consumers appear rather confident about their personal finances next year, while the other Europeans are confident about their countries’ overall economic situation as well. As usual, confidence in the construction index rose in Greece, by six points; it was the third largest rise after Finland’s (18 points) and Ireland’s (14 points).