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BRUSSELS (Alliance News) – Eurozone economic confidence deteriorated to a five-month low in August reflecting widespread weakness across sectors, adding to concerns that risks to growth intensified after the Brexit vote.

The economic confidence index fell more-than-expected to 103.5 from 104.5 in July, survey data from the European Commission showed Tuesday.

Economists expected a score of 104.1. This was the lowest reading since March, when it was at 103.

The industrial sentiment indicator came in at -4.4 versus -2.6 in July. The marked decrease in industry confidence was caused by the sharpest deterioration in managers’ assessments of the current level of overall order books since February 2009.

Similarly, the indicator for consumer sentiment fell to -8.5, in line with the flash estimate, from -7.9 in July. The weakness largely reflected more pessimistic views on future unemployment.

Retail trade confidence also plummeted in August, due to managers’ more negative views on the present and expected business situation. The corresponding index slid to -1.0 from +1.7 a month ago.

Lower services confidence was attributable to a significant drop in demand expectations and to a lesser extent, the assessment of past demand and the past business situation. The services sentiment index dropped to 10 from 11.2 a month ago.

Construction confidence was the only indicator holding up, thanks to higher employment expectations which dominated grimmer assessments of the level of order books.

Another survey showed that the business confidence index dropped to a near 3-year low of 0.02 in August from 0.38 in July. Economists had forecast the index to drop marginally to 0.36.

Managers’ assessments of past production, the level of overall and export order books deteriorated markedly. Production expectations worsened much less and views on the stocks of finished products remained stable.

Jack Allen, an economist at Capital Economics, said the survey suggested that growth has slowed and inflation expectations are weak.

The economist expects the European Central Bank to expand its quantitative easing programme and cut the deposit rate. This could all happen as soon as the next meeting, on September 8, Allen said.

Copyright RTT News/dpa-AFX

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