The euro zone's near-perfect recovery remains on track, with economic confidence dipping only slightly this month and inflation remaining within the target range of the European Central Bank (ECB).
The European Commission reported yesterday that its economic sentiment index fell by 0.4 points to 111.7 in June from a six-year high in May.
However, business confidence remains high, and consumer confidence has weakened only slightly.
Industry saw the euro zone's investment surge continuing, expecting an 8 per cent increase this year.
Yet German consumer spending still showed surprisingly few signs of life: retail sales in Europe's largest economy fell by an unexpectedly sharp 1.8 per cent between April and May, the country's statistical office reported.
Separately, euro zone inflation held steady at 1.9 per cent in June, according to a flash estimate by Eurostat, the EU's statistical office. That was within the ECB's definition of price stability, an annual inflation rate below but close to 2 per cent.
However, the ECB had originally expected inflation to fall further. Instead its projections have been blown off course by higher-than-expected oil prices.
With euro zone inflation expected to rise back above 2 per cent towards the end of the year, the ECB is expected to keep raising its main interest rate. Another quarter percentage point rise to 4.25 per cent is likely in September.
Some say the ECB will probably have to raise benchmark rates even further given the outlook for continued strong growth. - (Financial Times service)
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