Eurozone business confidence slips, UK back up to pre-referendum level

Posted on November 29, 2016

Business sentiment in the eurozone fell unexpectedly in November while the UK saw its economic confidence gauge climb above its pre-Brexit vote levels.

The European Commission’s monthly business climate indicator in the single currency area fell 0.14 points to 0.42 this month – a three-month low and defying expectations of a slight climb.

A related measure of eurozone economic sentiment was broadly unchanged, inching up by 0.1 points after several months of strong gains to an 11-month high.

Outside the eurozone, a healthy bounce in the UK’s economic sentiment dragged the EU-wide indicator up by 0.4 points, with Britain registering a 1.5 point increase to push its confidence gauge back above to its pre-referendum level.

It was the best monthly rise since December 2015 and corresponds with resilient consumer spending in the UK following the June 23 vote.

In Germany, economic sentiment slipped o.7 points, while France rose 1.5 points. Italian confidence fell 0.6 points as the country prepares to go to the polls in a key referendum next week.

Overall, the eurozone figures provide a welcome boost for policymakers at the European Central Bank, who are expected to announce an extension of their landmark stimulus measures next week, said Jack Allen at Capital Economics.

“With inflation pressures still very weak, and the EC survey measure of inflation expectations still consistent with low core inflation, we still expect the Bank next week to announce an extension to its asset purchases by six months at the current pace”, said Mr Allen.

Chart courtesy of Bloomberg

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