Wednesday 23 October 2019

Euro consumer sentiment at 20-month low in output fears


Consumer confidence in the Eurozone fell in November
Consumer confidence in the Eurozone fell in November

David Chance

The eurozone's consumer confidence index fell again in November and now stands five points below its peak at the start of 2018, signalling fears over sentiment amid falling output indicators in the bloc.

"Consumer confidence decreased markedly (-1.2) due to a deterioration of all its components, ie, consumers' unemployment and savings expectations and their views on their future financial situation and the future general economic situation," the European Commission said.

It added that "the decrease in the latter [period] was particularly strong".

Bucking the weaker trend, the survey showed that consumers in Germany were becoming more confident in their own finances and the reading there was the strongest in the eurozone, which signals the potential for a pickup in spending in Europe's largest economy.

Inside the eurozone, Italy saw its reading fall back to levels not seen since July 2017. The bloc's third largest economy is flatlining and Rome is in a standoff with the European Union over its budget.

Economic consultancy Capital Economics said that falling oil prices should feed through into consumers' wallets.

"There is already evidence that the tightness of the labour market is putting some upward pressure on wage growth," it said.

The broader Economic Sentiment Indicator, which covers both consumers and business, fell less than had been expected from 109.7 to 109.5, which Capital Economics said was consistent with solid GDP growth, which would encourage the European Central Bank to end its bond purchasing programme in December as planned.

The worst performing country in the European Union overall was Britain, where the index fell 3.1 points with the country caught in a fraught political debate over the terms of its exit from the EU.

A report from the British government earlier this week said the economy would be worse off under any Brexit scenario than it would have been staying in the European Union, with forecasts that a hard Brexit would cut potential economic growth by 8pc. The Bank of England said house prices could fall by 30pc in the event of Britain falling out of the EU without a deal in place.

There was no separate sentiment indicator for Ireland.

The economy here is the most vulnerable to any form of Brexit. With exports of goods and services accounting for 15pc of gross domestic product, there is bound to be a hit. Estimates of the damage from a hard Brexit run from a loss of 3-7pc off potential economic growth to 2030.

Central Bank Governor Philip Lane told an audience of bankers in Dublin yesterday that it would need significant mismanagement for financial stability risks to materialise.

"The Central Bank of Ireland will be focused on the resilience of the financial system, in order to mitigate the adverse impact of Brexit on the Irish economy," he said.

Irish Independent

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