Eurozone economic sentiment slips from decade high

Frankfurt - Eurozone economic confidence fell for the first time this year, led by weaker readings in the services and retail sectors.

The decline in the index of executive and consumer sentiment, while unexpected, still leaves the measure close to its highest level in a decade. It fell to 109.2 in May from 109.6 in April, which compares with the median estimate in a Bloomberg survey for an increase to 110.

The report will feed into the European Central Bank’s (ECB) discussion next week in Tallinn, where policy makers will assess the health of the 19-nation economy. 

President Mario Draghi has urged patience in outlining an exit strategy from negative rates and a €2.3trn bond-buying programme even as he told European lawmakers on Monday that the upswing is becoming increasingly solid and broad-based.

The decline in the confidence gauge marks the first modest stumble by the eurozone economy, which has shown continued signs of strength this year. IHS Markit, which publishes a monthly activity index, said last week that the economy is growing at a pace that would warrant tighter monetary policy if it wasn’t for weakening inflation.

Eurozone consumer-price growth probably slowed to 1.5% this month from 1.9% in April, economists predicted in a separate survey before a report on Wednesday. Spain’s inflation rate fell more than forecast in May, dropping to 2% from 2.6%, while data later on Tuesday is expected to show a drop in Germany.

The commission said consumers’ confidence was “robust” in May and their outlook for the economy turned more positive. Industry sentiment was “broadly stable,” and the decline in services confidence was due to a worsening of the assessment of past demand and demand expectations.

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