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Eurozone Economic Confidence At 4-Month Low

Eurozone Economic Confidence At 4-Month Low
4/29/2013 6:59 AM ET

Eurozone economic confidence declined more than expected in April, reflecting broad-based weakness across sub-components excluding consumer sentiment, intensifying pressure on the central bank to cut rates.

The economic sentiment index eased to 88.6, a four-month low, from a revised 90.1 a month ago, survey results published by the European Commission showed Monday. It was forecast to fall to 89.4.

Likewise, business confidence decreased by 0.18 points to -0.93, the commission said in a separate report. The reading came in line with economists' forecast of -0.9.

All components of business confidence except stocks of finished products deteriorated in April with sharpest declines in the assessments of past production and overall current order books.

The further and increased slippage in economic sentiment in April reinforces the belief that the European Central Bank is more likely than not to cut interest rates at its meeting on coming Thursday, IHS Global Insight's chief European economist Howard Archer said.

ECB President Mario Draghi last month hinted that the bank will maintain low interest rates in coming months as the economic weakness in the euro area has extended into the early part of the year.

If the ECB eases monetary policy, may be already later this week, and the European commission engineers a slower pace of fiscal consolidation, the Eurozone economy may still exit from recession later this year, ING Bank NV economist Martin van Vliet said.

But the economist noted that the fragility of confidence suggests that any economic recovery would likely be slow, and largely confided to the "core" countries.

The International Monetary Fund sees the crisis-hit 17-nation bloc to shrink 0.3 percent this year, before growing at a rate of 1.1 percent in 2014.

Data today revealed that industrial confidence came in at -13.8, down from -12.3 in March, and below the consensus forecast of -13.5. The decrease resulted from a much more negative assessment of the current level of overall order books and lower production expectation.

Driven by significantly worsened assessments of the business situation and demand over the past three months, services confidence worsened to -11.1 from -7.

At the same time, confidence among retailers eased to -18.1 from -17.1 in March. The decline was driven by worsened business expectations and views on the adequacy of current stocks.

Likewise, the indicator for the construction sector fell to -31.8 from -30.4, due to weaker employment expectations and assessments of order books.

Meanwhile, consumer confidence increased by 1.2 points to -22.3 in April, based on a marked easing of unemployment expectations and slightly better expectations concerning households' future financial situation.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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