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Euro zone economic sentiment declines as expected in July

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BRUSSELS (Reuters) – Euro zone economic sentiment continued to worsen as expected in July on less optimistic industry, services, retail trade and construction and inflation expectations among companies an consumers decreased as well, data showed on Tuesday.

The European Commission’s monthly sentiment survey showed the overall index for the 19 countries sharing the euro at 102.7 points in July, down from 103.3 in June and 105.2 in May, a trend underlining the expected economic slowdown. Economists polled by Reuters had expected a deterioration to 102.6.

Last week, European Central Bank President Mario Draghi all but pledged to ease policy further amid the deteriorating growth outlook and even hinted at a reinterpretation of the ECB’s inflation target.

Officials told Reuters last week an interest rate cut in September appeared certain, while government bond purchases and a revamped policy message were also likely.

The fall of the sentiment index in July was caused mainly by lower optimism in industry, where the index fell to -7.4 from -5.6, an easing in services to 10.6 from 11.0 a fall in retail trade to -0.7 from 0.1 an in construction to 5.0 from 7.6.

Sentiment among consumers, however, improved to -6.6 from -7.2.

Separately, the Commission said its business climate indicator, which points to the phase of the business cycle, plunged to -0.12 points in July from 0.17 in June — its lowest reading since September 2013 and much lower than the expected 0.08 in a Reuters poll of economists.

The Commission said inflation expectations among euro zone consumers 12 months ahead fell to 20.6 in July from 21.9 in June and 23.2 in May and selling price expectations in the manufacturing sector declined to 1.7 in July from 3.2 in June and 5.3 in May.

(Reporting By Jan Strupczewski)

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