U.S. News

Euro Inflation Holds Steady at 1.9%


Inflation in the 13 nations that share the euro held steady at 1.9% in June while business and consumer confidence slipped slightly after soaring a month earlier, the European Commission said Friday.

Price increases appear to be limited despite Europe's recent economic pickup after years of little growth. Euro-zone inflation has kept at that level since March, just at the European Central Bank guideline rate without setting off a warning of steeper prices that would cause the bank to raise interest rates again.

The figure is a first estimate from the EU statistics agency Eurostat and will be confirmed with a full breakdown of prices on July 16.

The EU executive arm's economic weather vane, the sentiment indicator, dropped to 111.7 in the euro area from 112.1 a month earlier while the entire 27-member European Union barely budged to 114.9 from 115 in May.

The European Commission said it was stabilizing after hitting a six-year high in May, pointing to less optimism among consumers and the services and retail sectors in both the EU and the euro area.

In the EU, this was partially offset by better industry confidence and no change in the construction sector, while the euro zone saw a happier building sector while industry managers' confidence was unchanged.

At the national level, overall economic sentiment improved in Spain, Poland and Britain but fell in Italy and Germany.

This was the first time EU consumer confidence has fallen in the past year, it said, blaming a drop in EU and euro consumers' unemployment expectations. People had not changed their views on their own financial situation or hopes for the general economic situation over the next 12 months, but euro consumers were a little more pessimistic about savings opportunities.

German and Italian consumers were a little downbeat, Spanish and British saw no change while Polish consumers saw brighter prospects.

Another survey of industrial managers, the business climate indicator, picked up slightly in June, reaching 1.54 from 1.52 a month ago.

The Commission said this showed robust economic activity in the industry sector in the second quarter despite decelerating production output in April. Managers raised their expectations for production in the months ahead but saw total order books and export books declining slightly.

The EU also highlighted another recent study showing that industrial managers were expecting to increase their investments this year, saying it would revise upward its forecast for real investment to grow 6% in the EU this year and 7% in the euro area.