Economic sentiment was little changed in July. At 95.8, the headline gauge was just 0.1 point below its unrevised June reading, albeit 0.2 points short of the market consensus. The indicator has been within a very tight band since the start of the year and remains some way off its 100 long-run average.

At a sector level, confidence deteriorated in industry (minus 10.5 after minus 10.2), services (4.8 after 6.2) and in retail trade (minus 9.2 after minus 7.9). However, there were gains in both the household sector (minus 13.0 after minus 14.0) and construction (minus 6.3 after minus 6.9).

Regionally, national sentiment worsened in France (94.8 after 95.8) but improved in Germany (92.3 after 92.1), Italy (100.1 after 99.7) and Spain (104.1 after 102.4). Italy and Spain were again the only two of the larger four economies to post above the common 100 historic mean.

Inflation expectations were mixed. Hence, expected selling prices in manufacturing rose from 6.2 to 6.8, its highest mark since April 2023 but, more importantly, eased in services (12.3 after 13.9) to its lowest print since June 2021. That said, the latter is still some away above its 6.4 historic norm. Meantime, inflation expectations in the consumer sector (11.2 after 13.1) slipped to a 7-month low.

The July update leaves the Eurozone ESI on an essentially flat trend and at a low enough level to signal only very modest growth. Combined with cautiously optimistic signals about inflation in services, the ECB should interpret the data positively in terms of another cut in interest rates next month. However, any move is still contingent upon favourable developments in the HICP. Today's reports put the Eurozone RPI at minus 5 and the RPI-P at exactly minus 7, both measures showing only a very limited degree of overall economic underperformance versus market expectations.

Economic sentiment in July is expected to hold steady and flat at 96.0 versus June's 95.9 which was well short of the 100 long-run average.

Released by the European Commission, the economic sentiment index (ESI) provides a broad measure of both business and consumer sentiment. Results are available for all participating countries and aggregated to the Eurozone and European Union level. The survey is very detailed and offers information on demand, output and inflation.

The survey offers key sentiment data across the European Union and the Eurozone region. Data are available for each country and are aggregated for both the Eurozone and EU. It is conducted by the European Commission rather than Eurostat, the compiler of most other EMU data. The index is a broad measure of both business and consumer sentiment in the EU members. Because of its coverage of all the EU countries it is highly regarded in the financial markets as a good indicator of the mood of consumers and industry in each country. It is also normally a good indicator of quarterly GDP.

Confidence indicators are calculated for industry, services, construction, retail trade and consumers. In turn, they are combined into an overall composite number, the economic sentiment indicator (ESI). The data are seasonally adjusted and defined as the difference (in percentage points of total answers) between positive and negative answers. The survey also covers other areas of the economy that are not explicitly included in the ESI. In particular, responses to questions about the inflation outlook are used by the ECB as one means of measuring inflationary expectations.