Eurozone confidence lowest in five years

BUSINESS and consumer confidence in the eurozone has fallen to its lowest level in five years and at the fastest pace since the 9/11 attacks in the US, with all indicators including services and retail showing a drop.

However economists said they do not believe the eurozone is in for a recession, instead predicting stagnation until the spring, followed by a rebound.

They also say the growing lack of confidence among German businesses increases the case for the ECB not raising interest rates in an effort to halt inflation.

The Economic Sentiment Indicator issued by the European Commission shows a sharp decline in both the EU generally where it fell by 5.8 points to 88.7, and the euro area where it dropped by 5.3 to 89.5.

This was the largest month-on-month decline since October 2001 in both areas and is the lowest since March 2003.

All five indicators — industry, services, construction, retail trade and consumer confidence — fell but the decline was particularly pronounced in services.

Consumer confidence also dropped again in July, indicating a cut back in spending by households. The biggest drop in sentiment among member states was in Italy (-9.6) and Britain (-7.2) followed by France (-4.7), Germany (-4.2). Ireland was not included.