Euro area economic confidence falls to lowest in 13 months

Euro area economic confidence fell to the lowest level in more than a year just as the European Central Bank deployed fresh stimulus to spur growth and quash the threat of deflation.

An index of executive and consumer confidence slumped for a third month, declining to 103.0 in March from a revised 103.9 the previous month, the European Commission in Brussels said on Wednesday. That’s the weakest since February 2015 and compares with a median estimate for a reading of 103.8 in a Bloomberg survey of economists.

On Friday, the ECB will ramp up monthly bond purchases to 80 billion euros ($89 billion) from 60 billion euros, as part of new measures that also include lower interest rates and a potential borrowing subsidy to euro-area banks. Announcing the package on March 10, President Mario Draghi said growth momentum had been weaker than anticipated at start of the year but that he expects the economic recovery to “proceed at a moderate pace.”

“The continued drop in the economic sentiment clouds the view of an improving eurozone economy in March,” said Bert Colijn, an economist at ING in Amsterdam. “This means that even though economic sentiment in the eurozone is still well above its long-term average, the overall declines in survey indicators hint at somewhat weaker GDP growth this quarter than in the fourth quarter.”

Sentiment among consumers fell to minus 9.7 from minus 8.8 the previous month, the report showed, while confidence in the services sector declined to 9.6 from 10.8 in February. Measures for construction and industrial confidence also dropped.

The latest data contrasts with a string of encouraging indicators from the 19-member currency area. The closely-watched German Ifo Business Climate survey improved for the first time in four months in March and Markit Economics’ Purchasing Managers Index of manufacturing and services rose to a three-month high.

The survey was conducted before March 22 when suicide blasts on the Brussels airport and the city’s subway killed more than 30 people and left scores of others injured.

Source: bloomberg.com