The Economic Sentiment Indicator (ESI) decreased by 1.5 points in the euro area (to 88.6) according to the European Commission's latest Business and Consumer Survey results.
"In the euro area, the ESI's decline was broad - based across all business sectors, with services witnessing the sharpest drop, while consumer confidence went up. Among the five largest euro area economies, economic sentiment worsened significantly in Germany (- 2.3) , France (- 2.0) and Italy (- 1.9), while remaining broadly stable in the Netherlands (+0.2 ) and improving in Spain (+ 0. 9).According to the Telegraph, "experts" had forecast a decline to 89.3.
The decrease in industry confidence ( - 1. 5 ) resulted from a much more negative assessment of the current level of overall order books and lower production expectations. Managers' assessment of stocks of finished products remained virtually unchanged. The past production and, to a lesser extent, the current level of export order books, which are not included in the confidence indicator, were also assessed more negatively .
Services confidence dropped abruptly by 4.1 percentage points, driven by significantly worsened assessments of the business situation and demand over the past three months. Demand expectations deteriorated to a lesser extent.
Consumer confidence increased by 1.2 points, based on a marked easing of unemployment expectations and slightly better expectations concerning households' future financial situation, the future general economic situation and savings over the next 12 months. Retail trade confidence decreased by one point, driven by worsened business expectations and views on the adequacy of current stocks. The assessment of the present business situation worsened only slightly. Also construction confidence decreased (- 1.3), based on weaker employment expectations and assessment s of order books.
Financial services confidence (not included in the ESI) improved markedly (+ 5.0), fuelled by considerably better assessments of the business situation and demand over the past three months. Demand expectations improved slightly. Employment plans were revised downwards across business sectors, contrasting with the easing of consumers' unemployment expectations. Selling price expectations decreased in industry, retail trade and construction, and increased marginally in services."
The pressure is now on the ECB to cut rates this Thursday. However, given that the ECB is dogmatically sticking to its anti inflation monetary policy, at the cost of millions of jobs in the Eurozone, I do not expect to see any cut in rates.
