Euro-Area Consumer Confidence Weakens in Wake of Brexit Vote

  • Gauge declines to minus 7.9 in July from minus 7.2 in June
  • U.K. vote seen hurting momentum in European economies

Consumer confidence within the euro area deteriorated in July after the U.K. voted to leave the European Union.  

An index of consumer confidence dropped to minus 7.9 this month, following a revised reading of minus 7.2 in June, the European Commission said on Wednesday. The median estimate by economists in a Bloomberg survey was minus 8.0.

By requiring a renegotiation of its economic ties, Britain’s June 23 vote has cast a pall over the region’s future. The International Monetary Fund announced Tuesday it had grown less optimistic on the prospects for global growth and warned the damage could worsen if confidence falters among investors and companies. The lion’s share of the pain will be felt advanced European economies, it said.

In Britain, consumer confidence plunged the most in 21 years in the wake of the Brexit vote, data earlier this month showed.

The U.K. rift comes just as the European Central Bank seeks to shore up growth and inflation within the 19-country currency bloc. While Italy and France are battling with structural difficulties, the German economy is faring better on the back of record-low unemployment. Yet depending on how the British economy develops, uncertainty resulting from the Brexit referendum may have “negative repercussions,” Germany’s Economy Ministry in Berlin said last week.

Economists surveyed by Bloomberg predict the ECB’s Governing Council will keep interest rates and the pace of quantitative easing unchanged at its policy review on Thursday, but may decide to expand it later in the year. When President Mario Draghi holds his press conference after the decision, he’ll probably reiterate his call for a global alignment of monetary, fiscal and regulatory policies.

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