Despite an improvement in August, Eurozone consumer confidence still signals a slowdown in spending, Jack Allen, an assistant economist at Capital Economics, said.
The flash consumer confidence index for the euro area rose to -6.8 in August from July’s -7.1, data from the European Commission showed Friday. This was the first increase in five months.
There are some reasons to think that confidence might rise further, he noted. Unemployment will edge down this year and the fall in oil prices will provide another boost to households’ real incomes.
Although the reduced uncertainty over Greece’s future in the Eurozone at the start of this month helped to support confidence, that could be reversed by this week’s announcement of early Greek elections, the economist observed.
Allen said unemployment in the currency bloc will remain high, keeping a lid on wage growth.
He said the consumer sector will not drive an acceleration in growth that would meaningfully erode the spare capacity in the economy and reduce the risk of a prolonged period of weak inflation.
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