The European Consumer is Suffering from the Economic Recession

The worst economic recession since resulting from the credit crisis is still showing its negative impact on different sectors of the economy as indicated by the PMI indicator. The euro zone released today its PMI services for June coming in at 44.7, showing that contraction in the services sector has slowed. Also, retail sales report for May was released today, screening the weakness in personal consumption on retails as it came in at -0.4%.

The ECB activated the purchase of bonds dominated by the euro, where the bank will start the real implementation this month on July 6 through buying 3-10 years maturity bonds worth 60 billion euros and providing 12 months maturity loans to financial institutions to pump liquidity and boost the economy.

The slowdown in the reading resulted from the change in consumption habits because it is noticeable that there is improvement, albeit at a low level, in the PMI composite which reflects the advance in production and demand on products; however, retail sales slipped despite the advance in the confidence data released in the previous months. This situation shows that there is improvement but consumers are still worried amid the ongoing incline in the unemployment rate which reached 9.5% and is expected to rise further to reach 10.0% or more in the coming year.

The ECB is persisting in supporting the economy which reflects that the economy is still weak and fragile and there must be a continuing assistance from the bank. Data released recently such as retail sales are ensuring the bank's claim. Also, PMI services in Italy released today showed contraction in June; hence, the ongoing interventions and monitoring the performance of the economy in the coming period are really needed.

Ecpulse

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