Eurozone Confidence Falls Further in June

June 28, 2012
The European Commission's confidence index for the 17-nation eurozone lost 0.6 points to 89.9 points, marking its third fall in a row.

Eurozone consumer and business confidence fell in June to the lowest level since October 2009, official data showed on Thursday, but sentiment remained stable across the wider European Union.

The European Commission's confidence index for the 17-nation eurozone lost 0.6 points to 89.9 points, marking its third fall in a row, while the figure for the 27-member European Union was stable at 90.4 points.

"There can be little doubt that the eurozone suffered renewed appreciable GDP (gross domestic product) contraction in the second quarter, while prospects look pretty bleak for the third quarter" as well, commented IHS Global Insight chief economist Howard Archer.

The eurozone figure was undermined in particular by a 2.2-point decline in a sub-index that measures sentiment in the predominant services sector, while the industrial sector also posted a drop of 1.3 points.

Better results were seen in the retail sector, where the confidence sub-index gained 3.2 points and construction, which was up by 2.1 points.

"The survey also supports other evidence that the downturn is now really hitting the core economies," Capital Economics economist Jennifer McKeown noted.

A breakdown by country showed the strongest declines in France and Germany, the two biggest eurozone economies, while the mood was brighter in Spain and Italy which are both struggling with reforms to correct public finances.

European leaders were to attend a two-day summit in Brussels starting Thursday to work on resolving the chronic eurozone debt crisis, which has thrown economic activity into the doldrums.

Eurozone private-sector activity sank to the lowest level for three years in the second quarter as business sentiment deteriorated, a purchasing managers index compiled by business research firm Markit showed last week.

The PMI was stuck at 46 points in June, the same level as May, pointing to another month of contraction in activity.

Last Friday, leaders of the four biggest eurozone economies -- Germany, France, Italy and Spain -- vowed to underpin economic activity with up to 130 billion euros ($163 billion) in funds.

"If Europe gets the financial-market panic back under control soon, fading austerity effects and a rebound in Germany could lead the currency zone out of recession towards the end of the year," Berenberg Bank economist Christian Shulz forecast.

The economists said that poor eurozone data raise the prospects for an interest-rate cut by the European Central Bank next week from the current level of 1%.

Copyright Agence France-Presse, 2012    

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