- Howard Archer at IHS Economics
Negative data in the Euro zone continues to mount, increasing pressure on the ECB to act decisively as soon as today. Retail sales in the Euro bloc, a closely watched proxy for household demand, slid 0.4% in July from the previous month and rose 0.8% on an annual basis. The decline in July was mainly caused by falling sales of food, drinks and tobacco. Sales slowed even though inflation had reached just 0.4% year-on-year in July and slowed to 0.3% in August. In the meantime, services sector activity in Germany slowed in August amid geopolitical tensions in Europe. The corresponding index declined from its recent multi-year high, falling to 54.9 compared with July's reading of 56.7. Business activity in French services sector remained in the green territory, but expanded slower in August. The services PMI inched lower to 50.3, down from 50.4 seen in July. In Italy, however, services PMI declined below the 50-mark threshold, which separates contraction from expansion, as the gauge fell to 49.8 compared to 52.8 in July. The headline composite Purchasing Managers' Index, a leading indicator monitoring development in the Euro zone's manufacturing and services sectors, came in at 52.5 in the eighth month of the year, down from the 52.8 reported in July.
The ECB meets today to discuss further monetary policy adjustments. Benoit Coeure, executive board member, hinted that the bank was ready to adjust policy further if needed.
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