EU economic morale drops as cuts weigh

 

EU economic morale drops as cuts weigh

Economic confidence in the euro region declined more than economists forecast in April, as the region’s slump showed signs of deepening.

By (Bloomberg)

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Published: Fri 27 Apr 2012, 11:01 PM

Last updated: Tue 7 Apr 2015, 12:16 PM

An index of executive and consumer sentiment in the 17-nation euro area fell to 92.8 from a revised 94.5 in March, the European Commission in Brussels said on Thursday. Economists had forecast a drop to 94.2 from a previously reported 94.4, the median of 29 estimates in a Bloomberg News survey showed.

Europe’s economy is faltering as spending cuts across the region undermine hiring and consumer confidence. Deutsche Bank AG, Germany’s largest bank, on Thursday reported a 33 per cent drop in first-quarter profit and PSA Peugeot Citroen, Europe’s second-biggest carmaker, said on Wednesday the European market was “weaker than expected” in the year’s first three months. “The situation is worsening again,” said Christoph Weil, a senior economist at Commerzbank AG in Frankfurt. “Periphery countries are behind budget targets with their economies deep in recession. It’s a cocktail that doesn’t bode well for the future and investors remain worried.”

The euro-area economy probably continued to shrink in the first quarter after contracting 0.3 per cent in the previous three months. The region’s manufacturing industry contracted for a ninth straight month in April, unemployment rose to 10.8 per cent in February and industrial orders declined that month. A gauge of sentiment among European manufacturers dropped to minus nine from minus 7.1 in March, Thursday’s report showed. An indicator of services confidence slipped to minus 2.4 from minus 0.3, while a gauge of consumer sentiment slumped to minus 19.9 from minus 19.1. Sentiment in the construction industry also declined this month.

Uncertainty remains “very, very high,” European Central Bank President Mario Draghi said on Wednesday. Risks to the economic outlook are on the downside, he said.

While governments from Ireland to Spain have toughened austerity measures to contain the fiscal crisis, investors remain unconvinced. Spanish 10-year yields breached six per cent last week and the cost of insuring the country’s bonds against default advanced to a record.

The crisis is also hurting companies. Deutsche Bank said first-quarter net income dropped to €1.38 billion ($1.82 billion), missing the average estimate of nine analysts in a Bloomberg survey.


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