Euro-Area Economic Sentiment Unexpectedly Rises After Brexit

  • Index of business, consumer sentiment rebounded in July
  • Survey may help guide ECB policy debate in September

Is Brexit Aftermath Pointing Towards U.K. Recession?

Euro-area economic confidence unexpectedly improved in July in a sign that the immediate impact on growth of Britain’s surprise vote to leave the European Union may be muted.

An index of business and consumer confidence rose to 104.6 in July from 104.4 the previous month, the European Commission in Brussels said on Thursday. Economists in a Bloomberg survey predicted a decline to 103.5.

“On the face of it, a lot of the business surveys look quite resilient up until now,” said Nick Kounis, head of macroeconomic research at ABN Amro NV in Amsterdam. “So far so good, but expectations indicators within a number of surveys have deteriorated more significantly. This could impact the activity measures over time.”

While the International Monetary Fund has warned that downside risks to global growth have increased significantly following the Brexit vote, policy makers from around the world haven’t succumbed to that kind of pessimism. European Central Bank President Mario Draghi has said that early estimates of the U.K. referendum’s economic impact need to be taken with a “grain of caution.” New growth and inflation forecasts are due in September.

Sentiment improved across most sectors in July, with a gauge of confidence in industry rising to the highest since December. Consumers were less optimistic than in June.

Unemployment fell in both Germany and Spain, separate data on Thursday showed. The jobless rate in Germany remained at a record low of 6.1 percent in July. In Spain, it fell to 20 percent in the second quarter, the lowest in almost six years.

Euro-area economic growth probably slowed to 0.3 percent in the three months through June from 0.6 percent in the previous quarter, according to a Bloomberg survey. Eurostat will release preliminary data on Friday, together with unemployment and inflation figures for the region.

The U.K. economy had a stronger-than-expected performance before Britons voted to opt out, with gross domestic product rising 0.6 percent in the April-June period after 0.4 percent. The pickup may mark the end of more than three years of uninterrupted growth -- economists predict a mild recession in the second half of 2016.

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