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Eurozone Economic Sentiment Drops For First Time In 3 Months

Eurozone Economic Sentiment Drops For First Time In 3 Months
3/29/2012 6:38 AM ET

Denting recovery hopes, Eurozone economic confidence dropped marginally in March as manufacturers and construction firms turned gloomy about future prospects.

After improving in January and February, the economic sentiment index fell to 94.4 from an upwardly revised 94.5 a month ago, survey data from the European Commission revealed Thursday. The reading was below the consensus forecast of 94.5.

Although the slip in Eurozone economic sentiment in March is disappointing and fuels growth concerns, it looks unlikely that the European Central Bank will trim interest rates further, IHS Global Insight European Economist Howard Archer said.

The decline was mainly driven by decreasing confidence in the industry and construction sectors. By contrast, confidence increased among consumers and in the services and retail trade sectors.

Due to a deterioration in managers' assessment of their companies' past production and current level of order books, industrial confidence worsened to -7.2 in March from -5.7 in February. Economists had expected it to fall to -5.8.

Similarly, confidence in the construction sector dropped to -26.5 from -24.6 a month ago, mainly due to a worsening of managers' employment expectations in the sector.

Meanwhile, services confidence improved to -0.3 in March from -0.9 in the previous month. Likewise, retailers' sentiment came in at -12.2, better than the -14 level logged a month ago.

Reflecting a strong increase in consumers' expectations about the general economic situation and an easing of unemployment fears, consumer confidence rose to -19.1 from -20.3 last month.

Consumers and businesses clearly still have plenty to worry about as more fiscal austerity remains in the pipeline, the debt crisis still unresolved and oil prices in euro terms at record highs, said ING Bank NV's economist Martin van Vliet.

Separate data from the European Commission showed that business sentiment fell by 0.14 points to -0.30 in March. The decline was driven by a more negative assessment of production expectations, order books and past production.

While managers' assessment of their stocks of finished products remained broadly unchanged, export order books were assessed slightly more positively in March.

by RTT Staff Writer

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