Europe’s outlook falls below forecasts

EUROPEAN confidence in the economic outlook fell more than economists forecast in November as the 17-nation eurozone edged closer to a recession and the fiscal crisis started to hit larger countries.

An index of executive and consumer sentiment in the euro area fell to 93.7 from 94.8 in October, the European Commission in Brussels said yesterday.

That’s the lowest since November 2009. Economists had forecast a drop to 93.9, the median of 31 estimates in a Bloomberg survey showed.

The numbers “support the message from other timely indicators that the eurozone is embarking on a deep recession”, said Jennifer McKeown, senior European economist at Capital Economics in London. “We now see gross domestic product falling by 1% next year and perhaps some 2.5% in 2013 as the debt crisis escalates and the currency union undergoes some form of break-up.”

Italy was again forced to pay above the 7% threshold that led Greece, Portugal and Ireland to seek bailouts when it sold €7.5 billion in bonds yesterday, short of the maximum target for the auction.

The Organisation for Economic Co-operation and Development (OECD) in Paris lowered its global growth forecast for this year and next, calling Europe’s fiscal crisis the main threat. The economy of the 34 OECD nations will expand 1.9% this year and 1.6% next year instead of a previously projected 2.3% and 2.8%, respectively, it said.

The eurozone is already in a “mild recession”, with gross domestic product rising just 0.2% in 2012, the OECD said. In 2013, the economy may expand 1.4%.

“The euro area crisis represents the key risk to the world economy,” the OECD said. “Contagion has entered a new phase and spread beyond euro area countries normally seen as fiscally vulnerable, suggesting that fiscal concerns are no longer the only driving force behind contagion.”

A gauge of sentiment among European manufacturers dropped to minus 7.3 from minus 6.5 in October, yesterday’s report showed. A services confidence indicator fell to minus 1.7 from 0.1 a month earlier, while a measure of consumer confidence fell to minus 20.4 from minus 19.9. A gauge of the business climate fell for a ninth month to minus 0.44 from minus 0.19.

Siemens AG, Europe’s largest engineering company, on November 10 forecast that profit next year won’t advance on “moderate” sales growth.

The Munich-based company joined rivals including France’s Schneider Electric SA in bracing for a spending slowdown as cash-strapped governments toughen austerity measures to counter the fiscal crisis.