Eurozone Economic Sentiment Deteriorates Sharply

(RTTNews) - Euro area economic confidence deteriorated to the lowest in more than a year in December as the improvement in services sentiment was offset by weaker morale in industry, construction and among consumers.

The economic sentiment index dropped more-than-expected to 93.7 in December from 95.6 in the previous month, survey data from the European Commission showed Wednesday.

A similar lower score was last reported in September 2023. Economists had forecast a moderate fall to 95.6.

The industrial confidence index plunged to -14.1 from -11.4 in November. This was the lowest since July 2020. Meanwhile, the services confidence index rose to 5.9 from 5.3 a month ago. The consumer sentiment index slid to -14.5 in December from -13.8 in the previous month. The reading matched the flash estimate.

Confidence among contractors also deteriorated in December with the index easing to -5.2 from -4.9.

At the same time, retailers' confidence remained broadly unchanged. The corresponding indicator registered -4.4 compared to -4.3 in November.

The survey showed that the employment expectations indicator declined to the weakest level since February 2021. The index registered 97.3 in December compared to 98.7 in November.

Selling price expectations increased across all sectors in December. The increase was significant in services and construction, and moderate in retail trade and industry, the survey showed.

Capital Economics' economist Elias Hilmer said the survey is broadly consistent with the euro area GDP stagnating in the fourth quarter. The survey suggested that inflationary pressures remained sticky. Despite the weakness of economic activity, the survey will add to ECB policymakers' concerns about the strength of domestic price pressures, the economist added.

Official data released on Wednesday showed that the decline in producer prices moderated in November amid a slowdown in the fall of energy costs. Producer prices registered an annual fall of 1.2 percent after a 3.3 percent decrease in October. Further, this was the weakest drop since May 2023.