Eurozone economic confidence deteriorated for the third consecutive month to a six-month low in March, but remained at an elevated level.
The economic confidence index fell more-than-expected to 112.6 in March from 114.2 in February, survey data from the European Commission showed Tuesday. This was the lowest since September and below the expected score of 113.3.
The deterioration of overall sentiment resulted from drops in industry, services and retail trade.
The industrial sentiment index came in at 6.4 versus 8.0 a month ago. The marked decrease resulted from managers’ more pessimistic views on all three components, namely, production expectations, the current level of overall order books, and the stocks of finished products.
Similarly, the retail trade sentiment declined to 1.6 from 4.5 a month ago. The strong deterioration largely reflects more negative views on both the past and expected business situation.
The services sentiment index slid to 16.3 from 17.6 in the previous month. The marked decline in services confidence was driven by managers’ more pessimistic views on all three components, namely the past business situation, demand expectations and, in particular, past demand.
Confidence among consumers remained unchanged, while it increased among construction managers. The consumer confidence indicator held steady at 0.1 in March and matched the flash estimate.
On the other hand, the construction sentiment index rose to 5.2 from 4.3 in February. The increase in construction confidence was driven by upward revisions of both managers’ employment expectations and their assessment of the level of order books.
Another report from the EU showed that the euro area business sentiment index fell marginally to 1.34 from 1.48 in February. The expected reading was 1.36.
Managers’ appraisals of past production, stocks of finished products, overall order books, and their production expectations worsened markedly. Meanwhile, managers’ assessment of export order books deteriorated only slightly.
The further fall in the economic sentiment in March echoes the message from the other surveys that Eurozone GDP growth may be at its peak, Jessica Hinds, an economist at Capital Economics, said.
With GDP growth no longer accelerating and inflationary pressures still muted, the economist expects the European Central Bank to tread very carefully and to continue to stress that interest rate hikes remain a long way off.