Eurozone Economic Sentiment Lowest In Over 2 Years
30 Enero 2019 - 02:10AM
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Eurozone's economic sentiment weakened for a seventh month in a
row in January to its lowest level in over two years, driven by a
sharp deterioration in industrial confidence caused by the
lingering uncertainties linked to Brexit, global trade tensions and
political threats such as protectionism. The economic sentiment
indicator fell to 106.2 from December's 107.4, survey data from the
European Commission showed on Wednesday.
Economists had expected an improvement in the score to 106.8.
The latest reading was the lowest since November 2016, when it was
105.6.
The industrial confidence index eased sharply to 0.5 from 2.3 in
December. The latest reading, also the lowest since November 2016,
was in line with economists' expectations.
With the European Central Bank assessing that the risks to
Eurozone growth outlook has moved to the downside, business
conditions are set to remain sluggish over the coming months. The
dovish remark has almost wiped out any hope of an interest rate
hike this year. Complicating the picture, euro area core inflation
is yet to embark on a sustainable path to converge with the ECB's
aim of "below, but close to 2 percent."
However, ECB President Mario Draghi stressed during his
post-decision press conference that the risk of recession in the
euro area is very low. Hopes of a rebound in economic activity have
been kindled by Germany, which likely avoided a technical recession
in the fourth quarter of 2018.
Data released earlier on Wednesday showed that France's
quarterly economic growth momentum remained stable at 0.3 percent
in the fourth quarter, despite the "yellow-vests" anti-government
protests. However, the full year growth rate eased sharply to 1.5
percent in 2018 from 2.3 percent in 2017. The European
manufacturing activity is expected to pick-up steam once the
dampening impact of the implementation of the WLTP emission tests
in the automobile industry gets over. In December, the ECB Staff
trimmed the growth projection for this year to 1.7 percent from 1.8
percent.
"At this point, we think the risk of a recession this year still
remains low, unless all downward risks materialize," ING economist
Peter Vanden Houte said.
"That said, the best now lies behind us, and Eurozone growth
should come out between 1.0 percent and 1.5 percent in 2019,
nothing to cheer about."
The ECB policy will have to remain very supportive and the bank
may announce a fresh round of cheap longer-term loans, the
so-called (T)LTRO, for banks by June to boost lending in the real
economy, the economist added. The EU survey showed that services
confidence index fell to 11 from 12.2 in December. The reading was
the weakest since September 2016. Economists had predicted a score
of 11.4.
The consumer confidence index remained in the negative
territory, though it improved to -7.9 from -8.3, in line with the
flash estimations. Morale deteriorated sharply in the retail trade
sector, while sentiment improved in the construction industry.
Separately, the European Commission reported that the business
climate index for the euro area tumbled to a two-year low of 0.69
in January from 0.86 in December. Economists had expected a reading
of 0.77.
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