Improvement In Eurozone Economic Confidence Halts

After rising for three straight months, Eurozone economic sentiment fell marginally as the weakness in industry and services were partially offset by the increasing confidence in retail and among consumers, survey results from the European Commission showed on Monday.

The economic confidence index unexpectedly dropped to 99.7 from 99.8 in January. The reading was forecast to improve to 101.

Due to a setback in managers’ production expectations, the industrial confidence indicator fell to 0.5 in February from 1.2 in January, while economists expected the score to rise to 2.0.

Similarly, the services sentiment index unexpectedly slid to 9.5 from 10.4 a month ago. The expected reading was 12.4. There were significant declines in managers’ views on the past business situation and demand expectations.

By contrast, confidence among consumers strengthened for the fifth month in a row. At -19, the consumer confidence index rose from -20.7 in January and matched the flash estimate. Consumers were more positive about own financial situation as well as general economic situation.

Confidence among retailers improved again in February, thanks to markedly improved assessments of the past business situation and their expected business situation. The corresponding index rose to -0.1 from -0.7 a month ago.

At the same time, the construction confidence index gained only 0.4 points to 1.8 in February as managers’ more positive employment expectations were offset by a decline in their assessment of the level of order books.

The employment expectations index declined to 109.4 from 109.7 in January. There were marked deteriorations in employment plans of managers in industry and services.

On inflationary pressure, the survey showed that selling price expectations lessened notably in industry, construction and, to a lesser extent, in services and retail trade.

The economy will struggle this year with high inflation but it could profit from fading supply-side problems, Capital Economics’ economist Andrew Kenningham, said. This leaves economic growth around stagnation for the winter months.

Data released earlier in the day showed that growth in the euro area bank lending continued to weaken and the narrow measure of money supply contracted for the first time on record, reflecting the impact of monetary policy tightening.

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