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Eurozone Economic Sentiment Drops Further, Retail Sales Fall


Suggesting a harsh situation at the end of 2011, Eurozone economic sentiment slid for the tenth successive month in December. Moreover, fragile consumer demand led to a worse-than-expected drop in retail sales in November, data showed Friday.

The downward trend in Eurozone economic confidence continued in December, according to a survey from the European Commission. The corresponding indicator fell to 93.3 in December from 93.8 in November. But the index remains slightly above the consensus forecast of 93.2.

Industrial confidence remained unchanged at -7.1 points, while the sentiment index for services fell to -2.1 points. Retailers' confidence dropped to -11.7 from -11.1. Likewise, sentiment in construction slid to -25.2 from -25.

Consumer confidence declined to -21.1 in December, mainly on the back of growing concerns about their expected financial situation and savings. The flash reading for December was -21.2.

A separate survey revealed an improvement in business confidence in the euro area. Confidence strengthened for the first time in ten months to -0.31 in December from -0.42 in the prior month.

Increased optimism about production expectations, as well as a more positive assessment of production trends observed in recent months and export order books underpinned the positive development.

By contrast, managers were more pessimistic about their overall order books, and their assessments of stocks of finished products marginally increased in December.

Elsewhere, Eurostat said euro area retail sales fell 0.8 percent month-on-month compared to economists' expectations for a 0.4 percent drop. This followed a 0.1 percent increase in sales in October.

On a yearly basis, retail sales decreased at a faster pace of 2.5 percent after logging a 0.7 percent decline in October. The decline far exceeded a 0.9 percent slump forecast by economists.

November's monthly fall in retail sales suggests that consumer spending did nothing to offset the weakness of business activity at the end of last year, Jennifer McKeown at Capital Economics said.

The economist expects gross domestic product to fall about 1 percent this year and an even sharper decline in 2013.

The jobless rate in the 17-nation currency bloc remained unchanged as expected in November, at the highest since June 1998. The unemployment rate came in at 10.3 percent. The number of unemployed totaled 16.372 million in November, up 45,000 from October.

Reflecting weakness in the overall economic activity, Eurozone industrial orders logged a weaker-than-expected growth in October. The Purchasing Managers' survey also revealed continuing contraction in the private sector output.

On the inflationary front, both consumer prices and pipeline inflation slowed to indicate weak underlying price pressure in the economy that is feared to have relapsed into contraction.

Producer price inflation eased to 5.3 percent in November from 5.5 percent in October. Although inflation continues to stay above the central bank's target of 'below, but close to 2 percent', annual inflation fell to 2.8 percent from 3 percent in December.

by RTTNews Staff Writer

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