Europe’s belief in the strength of its feeble economic recovery has faded sharply, a closely watched survey of business and consumer sentiment released yesterday showed.
“After 10 months of uninterrupted improvement, the rebound appears to have lost its momentum,” the European Commission said as it unveiled a fall of 0.1 points to 95.9 points for the eurozone in its Economic Sentiment Indicator.
Amid fears over Greek debts and with official growth figures already practically flat for the fourth quarter of last year, the latest data appeared to confirm a trend toward stagnation across Europe’s economy.
While the index rose narrowly by 0.2 points to 97.4 points for the 27-nation EU as a whole, there was a heavy 1.9-point drop for France, with confidence weakest in industry.
Heavy lifting from the EU’s fastest-expanding economy, Poland, where the index rose by 4.2 points, helped the overall average, with sentiment “broadly unchanged” in the UK, up by just 0.1 percent, the Commission said.
The UK and Poland are EU member states, but are not in the eurozone.
“Admittedly, it is the first drop in sentiment for 11 months and only modest, and hiccups are always likely,” IHS Global Insight analyst Howard Archer said. “Nevertheless, it adds to a recent series of generally disappointing economic data and surveys for the eurozone.”
He pointed in particular at survey breakdown showing consumer buying intentions over the next year retreated as unemployment concerns rose.
In industry, sentiment was up in the eurozone, but down in the UK.
Confidence in services showed a sharper improvement, but was offset by a steep drop in sentiment for the retail sector — “driven by a significant drop in Germany and Italy.”
Financial services and construction each saw sentiment recover to an extent, but consumer confidence was down, with Spanish unemployment fears to the fore.
Meanwhile, a survey by Fitch credit ratings agency showed yesterday that European and US investors are worried about European government debt levels, but cautiously optimistic on international corporate debt.
Monica Insoll, managing director at Fitch’s credit market research group, said in a statement that the survey had found that “investors have a negative view on sovereign debt fundamentals and funding needs in 2010.”
She added, however, that “responses from senior credit investors across Europe paint a picture of continued improvement in fundamental credit conditions in relation to corporate asset classes.”
The survey also found that 70 percent of European investors are concerned that sovereign credit fundamentals would deteriorate and 55 percent expect sovereign bond spreads to widen.
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