Monday 26 September 2016

Eurozone economy 'flying on one engine' warns S&P

Published 31/03/2016 | 02:30

Paratroopers in Paris amid tighter security after Brussels attacks. Eurozone confidence had slipped even before latest atrocities. Photo: Reuters
Paratroopers in Paris amid tighter security after Brussels attacks. Eurozone confidence had slipped even before latest atrocities. Photo: Reuters

Economic confidence across the euro area had dropped to the lowest level in more than a year, even ahead of last week's deadly bombings in Brussels.

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Meanwhile, rating agency Standard & Poors (S&P) warned that Europe's key economy is "flying on one engine" - in this case recovering consumer demand.

The European Commission's own economic sentiment monitor, based on combined measure of executive and consumer confidence, slumped for a third month in March to the weakest level since February 2015.

"A nosedive in financial conditions at the start of the year has taken some wind out of the Euro zone economy," S&P's chief European economist, Jean-Michel Six, said.

S&P cut its forecast for Eurozone growth this year to 1.5pc from 1.8pc, and to 1.6pc in 2017.

From tomorrow the European Central Bank will ramp up its increasingly extreme measures aimed at stimulating growth, including lifting monthly bond purchases to €80bn from €60bn. But S&P said central bank actions are having a diminishing impact on inflation and growth prospects.

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.

In better news closer to home, figures from Deloitte show the number of business insolvencies was effectively unchanged at 251 in the first quarter of this year, versus 2015.

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