Confidence in eurozone falls as debt crisis bites
EUROZONE economic sentiment defied market expectations and fell sharply in May, indicating that the eurozone debt crisis has begun affecting the currency zone's real economy.
The European Commission said yesterday that economic sentiment in the 16 countries using the euro fell to 98.4 in May from 100.6 in April. Economists had expected a rise to 100.8 points.
"The worsening in economic confidence in May confirms that the sovereign debt woes in the southern periphery have started to spill over into the real economy," said economist Martin van Vliet. "Domestic recovery prospects in the eurozone are darkening."
Prices of debt in some eurozone countries have been falling sharply due to market concern over bloated public finances and low growth rates, forcing governments to announce fiscal austerity measures that are likely to slow growth further.
Confidence among consumers fell to minus 18 in May from minus 15 in April, the commission report showed. Sentiment in the retailing, construction and services industries also declined. Manufacturing sentiment rose to minus 6 from minus 7.
An index of economic confidence in Greece dropped to 61.9 in May from 69.1 the previous month, while a gauge for Portugal fell to 91.1 from 93.8. Sentiment in Spain also declined. Ireland is the only one of the 16 states not to be included in the EU barometer.