Euro-zone mood worsens despite ECB action
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The European Central Bank's new measures to boost growth and the inflation rate across the euro zone seem to have inspired little fresh optimism among businesses and households about the single-currency area's economic prospects.
A European Commission survey released Friday recorded a decline in confidence during June.
The ECB announced a package of measures June 5 designed to stave off the threat of dangerously low inflation in Europe, including cutting a key interest rate below zero for the first time to get banks to lend more to credit-starved customers.
It is too early for those measures to affect growth and inflation. ECB President Mario Draghi said it may take between nine and 12 months for their full impact to be felt.
But the Commission's survey indicates that neither consumers nor businesses view the measures as having the potential to improve the outlook for the economy and their own prospects.
The European Commission Friday said its headline Economic Sentiment Indicator-which measures confidence in a number of business sectors and among consumers fell to 102.0 from 102.6 in May. That was a surprise, with the consensus forecast of 17 economists surveyed by The Wall Street Journal last week having been for a rise to 103.0.
The decline in confidence was visible in each of the euro zone's three largest member economies, with the national ESIs falling in Germany, France, and Italy. However, the ESI for Greece--the currency area's most troubled member over recent years--surged to stand above its long-term average for the first time since August 2008. The ESIs for Spain and the Netherlands also rose.
Euro-zone manufacturers reported a decline in new orders, including export orders, while confidence also fell in the retail and construction sectors. In the services sector, confidence picked up.
That loss of optimism may lead some businesses to hold back on planned investments, or delay hiring plans, though confidence remains strong despite the June setback, with the ESI still above the 100.00 mark that indicates its average going back to 1990.
Consumers became slightly more downbeat about the outlook for the economy over the coming 12 months. They also saw a higher risk of becoming unemployed.
As for inflation, they expected prices to rise less rapidly over the coming 12 months than they did in May, a clear indication that they are skeptical about the prospects of success for the ECB's latest initiatives.
The annual rate of inflation in the euro zone has been below 1.0% since October of last year, and the ECB's actions followed a decline to 0.5% in May from 0.7% in April. Early indications suggest the rate of inflation is unlikely to have picked up significantly this month. Of the euro zone's 18 members, only Spain and Belgium have released inflation figures, but both sets of figures published Friday recorded a fresh decline this month.
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