Euro-area consumer confidence unexpectedly fell in July as political uncertainty in the Middle East and Ukraine threatened to derail the region’s feeble economic recovery.
An index of household confidence in the 18-nation euro zone decreased to minus 8.4 from minus 7.5 in June, the European Commission in Brussels said in a preliminary report today. That fell short of the median forecast of minus 7.5 in a Bloomberg News survey of 21 economists.
While surveys of purchasing managers signal that the euro area’s recovery is becoming more sustained, risks to the outlook are increasing. Germany’s economy probably stagnated in the second quarter as a banking crisis in Portugal and tensions in Israel and Ukraine risk damping growth.
The European Central Bank cut interest rates to record lows last month and unveiled unprecedented stimulus measures to fuel inflation, which is running at a quarter of policy makers’ goal. Growth in the 18-nation euro economy may have accelerated to 0.4 percent from 0.2 percent in the first quarter, Markit Economics said this month.
European car sales, an indicator of economic sentiment, rose 4.3 percent in June as demand at Renault SA’s budget Dacia division and Volkswagen AG’s Seat nameplate contributed to the longest stretch of monthly delivery gains in four years. The car market reached a two-decade low in 2013.
Even so, International Monetary Fund Managing Director Christine Lagarde said last week that Europe’s rebound may have made investors too optimistic about a region that still faces elevated unemployment and high public debt. Economists forecast that Greece, which triggered Europe’s debt crisis in 2010, will need a third bailout.