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Athens - Eurozone economic confidence continued its slide in March as the region showed signs of more moderate growth.
Optimism slipped in the region’s five biggest economies, taking the overall index to its lowest in six months. It’s a third straight drop from a 17-year high reached in December and comes as a separate survey by UBS Group shows more companies expect to pare back investment as a result of Brexit.
The Commission report is the latest in a string of data suggesting economic growth in the currency bloc has cooled off after 2017 saw the fastest expansion in a decade. Purchasing Managers’ Indexes showed manufacturing and services activity in the eurozone is growing at its slowest pace in 14 months, while investor confidence dropped amid mounting fears of a trade war.
Still, European Central Bank (ECB) officials have expressed confidence in the region’s outlook. President Mario Draghi told European leaders that investment is rising to levels not seen in at least a decade, private sector debt is falling, and capital ratios of healthy banks are almost 50% higher than at the start of the crisis. The Frankfurt-based institution predicts economic growth will accelerate to 2.4% in 2018 from 2.3% last year.
At the same time, inflation has remained stubbornly below policy makers’ goal of just under 2%.
While Draghi insists that an ample degree of monetary accommodation is still needed, Bundesbank President Jens Weidmann, a long-time critic of quantitative easing who is favourite to take the helm of the ECB next year, reiterated his view on Monday that the scaling back of stimulus should start soon.
The commission report showed that euro-area economic sentiment worsened in manufacturing, services and retail trade, while a gauge for construction increased. Consumer confidence was unchanged in March. In a separate report Tuesday, the ECB said loan growth to companies weakened in February.
According to the UBS survey on Tuesday, 39% out of executives polled said they expect to reduce investment as a result of Brexit, an increase from 35% in the third quarter of last year. Against that, companies are granting themselves more time to make the adjustment compared with the last poll, possibly in anticipation of a transition deal, according to UBS.
“Firms seem most concerned about uncertainty related to the future of the EU, the policies of the US administration and Brexit,” said the report’s authors, led by UBS chief European economist Reinhard Cluse. “Concern over the political situation in Spain and Germany has risen. But surprisingly, the political climate in Italy seems to be only of moderate concern.”
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