Euro zone sentiment drops more than expected, hits 8-month low

BRUSSELS Thu Aug 28, 2014 5:24am EDT

BRUSSELS (Reuters) - Economic sentiment in the euro zone worsened by more than expected in August and fell to its lowest level in eight months, mainly on deteriorating morale in the retail, consumer and industry sectors, the European Commission said on Thursday.

The recovery in the bloc of 18 countries using the euro stalled unexpectedly in the second quarter and the outlook for a solid rebound remains clouded while the crisis in Ukraine is denting the business mood and trade with Russia.

The European Commission's economic morale index dropped to 100.6 points in August from a revised 102.1 in July, while analysts surveyed by Reuters expected a drop to 101.5.

Among the largest euro zone economies, sentiment dropped significantly in Italy by -4.1, sending the index below its long-term average of 100 for the first time since February, and in Germany by -1.9 to 104.1.

Industry confidence dropped mainly due to more cautious views on expected production, while deteriorating consumer confidence was driven by more negative assessments of future unemployment and the future general economic situation.

Consumer inflation expectations fell slightly to 8.6 in August from 8.7 in July, while producer prices expectations slipped into negative territory, standing at -0.1 in August following the 0.4 seen in July.

Separately, the euro zone's Business Climate Index - which points to the phase of the business cycle - dipped by less than anticipated to 0.16 points from 0.17 in July.

NOTE

- For European Commission data click on:

here

(Reporting by Martin Santa; editing by Robin Emmott)

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