Euro Inflation Falls to 1.8% as Business Confidence Slips

Inflation in the 13 nations that use the euro fell to 1.8% in July, the EU statistics agency said Tuesday, as business confidence weakened from a near-record high.

Europe still seems to be enjoying low prices and solid growth that it hopes will cut its high jobless rates. Unemployment in both the 27-nation European Union and the euro area held steady in June at a record low of 6.9%, Eurostat said.

In a first estimate for the month, Eurostat said inflation had dropped from last month's 1.9% going below the European Central Bank's guideline for deciding whether it needs to raise interest rates to calm price increases. It will confirm the rate and explain the reasons behind the decrease on Aug. 16.

Economic confidence slipped during the month in both the EU and the euro zone, although the European Commission stressed that it had merely fallen back from very high levels. Its economic sentiment indicator recorded a reading of 113.3 for the EU in July, down from 115 a month earlier, and 111 in the euro currency region from 111.7 in June.

Industry Sector Should Remain Firm

The EU's executive arm said the high level of a related economic weather vane the business climate indicator suggested that economic activity in the industry sector should remain firm for the rest of the year despite slowing in April and May.

Industry confidence in both regions dropped as managers were less optimistic about future output and order books. Confidence in the services sector fell in the EU as managers worried more about the current business situation; the euro region also felt the same concern but the indicator stayed stable as managers were brighter on how they saw recent and expected demand.

Consumer confidence overall was unchanged in both regions although people were more upbeat about job prospects but slightly less optimistic about the general economic situation in the year ahead. German, Spanish and Polish shoppers saw better prospects while French shoppers were a little more gloomy and Italy and Britain saw no change.

Confidence among retailers in the euro area surged as German, French and Italian stores raised their assessment of the current situation. In the EU as a whole, confidence remained stable as Spanish and British stores painted a blacker picture.