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Decline In Eurozone Economic Sentiment Exceeds Forecast

Decline In Eurozone Economic Sentiment Exceeds Forecast

Eurozone economic confidence declined notably in April, wiping out the gains logged in the first quarter. The weakness in both economic and business sentiment hurt recovery hopes.

Economic confidence fell more than expected to 92.8 from a revised 94.5 in March, survey results from the European Commission showed Thursday. Economists had forecast the reading to drop to 94.2.

The decline in the euro area sentiment was mainly driven by weakening confidence in the industry and services sectors. Confidence improved only in the retail sector.

Industrial confidence deteriorated unexpectedly to -9 from revised -7.1 in March. The expected reading was -7. The region saw a drop in managers' production expectations along with a more negative assessment of order books.

Services confidence came in at -2.4, weaker than economists' expectations for -0.5 points and down from -0.3 in the previous month.

Likewise, consumer confidence weakened to -19.9 from -19.1 a month ago. The latest fall was mainly due to more pessimistic expectations about the general economic situation and, to a lesser extent, households' own financial situation.

Meanwhile, retailers' confidence improved to -11.4 from -12 in March. The improvement was entirely driven by a more positive assessment of the volume of stocks, while the present business situation was assessed somewhat more negatively and expectations about the business situation remained unchanged.

Confidence in the construction sector decreased by 0.7 points to -27.4 in April on the back of weaker employment expectations for the sector.

The business climate indicator for the euro area decreased by 0.24 points to -0.52 in April, a separate report showed. The reading was forecast to remain unchanged at March's originally assessed figure of -0.3.

The unexpected decline in business confidence was mainly driven by a more negative assessment of export order books, production expectations, past production and overall order books. At the same time, managers' assessment of their stocks of finished products remained broadly unchanged in April.

The latest survey evidence reinforces the assessment that Eurozone GDP is headed for a third quarter of contraction in the second quarter of 2012 after GDP highly likely declined in the first quarter, said IHS Global Insight Chief European Economist Howard Archer.

by RTT Staff Writer

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