EU May economic sentiment falls after near ten-year high in April

FILE PHOTO: 20 Euro banknotes are seen in a picture illustration

BRUSSELS (Reuters) – Euro zone economic sentiment fell in May from a near 10-year-high in April against expectations of a rise, as confidence mostly dropped in services, European Union data showed on Tuesday.

The European Commission’s monthly survey said the overall index for the 19-country currency bloc fell to 109.2 from an upwardly revised 109.7 in April. Economists polled by Reuters had expected an increase to 110.0 points.

A separate business confidence indicator, which indicates the phase of the business cycle, fell to 0.90 in May from an upwardly revised 1.10 in April, against market expectations of a rise to 1.11.

The drop in sentiment was mostly driven by less optimism in the services sector, the largest in the euro zone, which dropped to 13.0 in May from 14.2 in April.

Confidence in the retail sector also dropped to 2.0 from 3.1.

But in a sign that the euro zone economy is still in a phase of healthy recovery, the manufacturing sector recorded a boost in confidence to 2.8 points from 2.6.

Inflation expectations among consumers went down to 12.8 from 13.9, in a sign of appetite for future purchases. Expectations of selling prices among manufacturers were stable.

Lower inflation would reduce pressure on the European Central Bank to quickly end its monetary stimulus.

The indicator for overall consumer confidence rose to -3.3 points in May from a downwardly revised -3.6 in April.

(Reporting by Francesco Guarascio; editing by Philip Blenkinsop)