(menafn – ecpulse)
European confidence fell this month below forecasts amid the sluggish growth pace and worries regarding escalation of debt crisis.
Economic confidence retreated to 92.8 in April compared with the revised 94.5 and forecasts of 94.2.
The latest data is raising skeptics the euro area is heading towards another recession which reduced both consumers and investor's confidence.
Consumer confidence slipped to -19.9 from -19.1, while business climate indicator reached -0.52 from the revised -0.28.
Data released this week showed that euro area major sectors showed contraction in April, citing the negative impact of the debt crisis on the 17-nation region.
PMI manufacturing showed a widening contraction to 46.0 in April from 47.7 and services also showed a contraction of 47.9 from 49.2 in March. Accordingly, PMI composite slipped to 47.4 from a prior of 49.1.
Industrial confidence slipped to -9.0 from the revised -7.1 whereas services gauge fell to -2.4 from March's reading of -0.3.
The sharp austerity measures adopted by European governments to adhere to the strict EU budget rules are weighing on consumer spending and pushing up unemployment rates.
Yesterday, ECB President Mario Draghi urged euro area members to have a “growth compact” as the debt crisis worsens, where he said uncertainty remains “very, very high.”
In fact, the improvement in German investor and business confidence does not provided hopes the euro area's largest economy will escape recession this year as it seems that Germany is moving solely towards recovery since the macroeconomic situation in other euro area nations is not pleasant, most notable in Spain which suffers from unemployment rate of 24% and contraction in the economy.
Meanwhile, there are worries that the crisis is intensifying after the recent rise in Spanish 10-year bond yield as it came close to 7% which forced euro area peripheral nations to ask for international aid.
Today, Italy sold 8.5 billion euros six month bills with a rising yield of 1.77% from 1.12% at an auction last month.
European officials had looked for global assistance after expanding the European permanent rescue fund and the ECB continued its support to banks.
In the latest G20 and IMF meeting, leaders and the fund pledged to double the lending power of the rescue fund dedicated to combating debt crisis.
Additionally, there are political worries in France and Netherlands that change in political situation might hamper efforts to combat crisis due to the conflict on austerity measures among political parties.
Yesterday, the Dutch queen called for September 12 elections after the collapse of the government following the biggest opposition parties' refusal to support austerity measures needed to meet EU budget goals. Accordingly, the euro area's fifth-biggest economy is expected to witness a shaky economic and political outlook for several months.
As of 09:30 GMT, the euro lowered its gains versus the U.S. dollar as the dollar is trading around 1.3230, falling from a high of 1.3263.
