Eurozone Economic Confidence Weakens

Eurozone economic confidence dropped to a 3-month low in February on broad-based weakness across sectors excluding services. The economic sentiment index fell to 114.1 in February from 114.9 in the previous month, survey data from the European Commission showed Tuesday. This was the lowest since last November, but slightly above the expected score of 114. 

The consumer confidence index slid to 0.1 from 1.4 a month ago. The score came in line with the flash estimate. The decrease in consumer confidence reflected more negative assessments of all its components with the biggest decline in consumers' future unemployment and savings expectations. The industrial sentiment index dropped to 8.0, as expected, from 9.0 in January, mainly due to a strong reduction in managers' production expectations. 

Similarly, the sentiment index for retail trade dropped to 4.3 from 5.2. The decline resulted from more negative views on both the present and the expected business situation. Meanwhile, the services confidence index rose to 17.5 from 16.8 in the previous month. Increasing services confidence was driven by more positive views on all its components, namely managers' demand expectations as well as their assessment of past demand and the past business situation. 

The construction sentiment index decreased 0.5 points to 4.2 in February, which was due to downward revisions in managers' employment expectations. Another report from the EU showed that the business confidence index fell to 1.48 in February from 1.56 a month ago. Managers' appraisals of past production and export order books decreased slightly, while their production expectations worsened markedly. 

Meanwhile, managers' assessment of stocks of finished products and overall order books remained broadly unchanged. Despite the weakness in the sentiment indicators, Bert Colijn, an ING economist said, with significant backlogs of work, production at high levels and businesses indicating improved hiring, the Eurozone economy is set for continued strength in the foreseeable future.