World Economy

EU Economic Confidence at Eight-Month Low

EU Economic Confidence at Eight-Month LowEU Economic Confidence at Eight-Month Low

Eurozone economic sentiment dropped to an eight-month low in February as weak global environment and financial market concerns weighed on optimism across almost all sectors.

The economic sentiment index fell for the second straight month in February, to 103.8 from a revised 105.1 in January, survey data from the European Commission showed Friday. This was the lowest score since June 2015 and below the expected reading of 104.3, RTT reported.

Data highlights the downside risks to eurozone growth coming from global economic problems and uncertainties (primarily centered on China and the emerging markets) and financial market turmoil, IHS Global Insight Economist Howard Archer, said.

Archer expects the European Central Bank to trim its deposit rate by a further 10 basis points to -0.40% at its March meeting and believe it could very well step up its monthly purchase of assets, perhaps by €20-30 billion ($22-33 billion) from the current level of €60 billion.

Elsewhere, William Jackson at Capital Economics, said the big picture is that growth in the Central and Eastern Europe remains strong. Most of the fall in the ESIs came from weakness in manufacturing sentiment, which may reflect softer growth in key eurozone trading partners, the economist noted.

The deterioration in overall confidence resulted from worsening confidence among consumers, and in all business sectors but construction.

The industrial confidence dropped to -4.4, the lowest since February 2015, from -3.1 in January. The decline was largely due to managers’ more pessimistic views on the current level of overall order books and worsened production expectations.

Similarly, the services confidence indicator came in at 10.6, down from 11.5 in the prior month. The weakness was caused by managers’ markedly grimmer demand expectations.