2014.07.3009:17:00UTC+00Eurozone July Economic Sentiment Unexpectedly Improves

Eurozone economic sentiment rose unexpectedly in July driven by confidence improvements in industrial and construction, survey data revealed Wednesday.

The economic confidence index rose marginally to 102.2 in July from 102.1 in June, figures from European Commission showed. Economists had forecast the score to fall to 101.9 from June's originally estimated value of 102.

The indicator remains close to May's 34-month high of 102.1. Improvement in sentiment of the industrial and construction sectors was offset by declines in the service sector and retail trade and also among the consumers.

The index measuring industrial confidence rose to -3.8 from -4.3 a month ago. The increase was due to managers' more optimistic views on expected production and the current level of overall order books, while their assessment of stocks of finished products remained broadly unchanged.

Meanwhile, the confidence index for the service sector fell to 3.6 from 4.4 a month ago. The decline in services confidence was caused by managers' significantly lower demand expectations and more muted assessments of the past business situation which more than outweighed a more positive stance on past demand.

Sentiment of the construction sector improved, with the corresponding index rising to -28.2 from -31.7 in the previous month. The rise in construction confidence was fueled by a marked upward revision of employment expectations and, to a lesser extent, managers' improved assessment of the level of order books.

As initially estimated, consumer sentiment weakened for the second consecutive month in July. The index measuring consumer confidence fell to -8.4 from -7.5 in June. Consumer confidence slid owing to markedly more pessimistic assessments of future unemployment and the future general economic situation, which were only partly offset by a moderate improvement in consumers' assessment of their future savings.

The results of a separate survey by the European Commission showed that business confidence dropped slightly, with the index slipping to 0.17 in July, the lowest since last October, from 0.21 in June.

Managers' more optimistic views on expected production and the current level of overall order books were offset by an important decline in their assessments of past production. Managers' assessment of stocks of finished products and export order books remained broadly unchanged.

It is highly likely that events in the Ukraine and heightened global geopolitical tensions are taking an increasing toll on confidence in some countries, noted, IHS Global Insight's Chief European Economist Howard Archer.

Stable Eurozone business and consumer confidence in July will be of some relief to the European Central Bank, he said. It is odds on that the ECB will sit tight at its August policy meeting, especially as a weaker euro and lower bond yields are helping matters.