Economic sentiment in the eurozone deteriorated at a faster pace than forecasted in March. Falling for the ninth month in row, the worsening mood was mainly due to a bleaker outlook among manufacturers and services.
Sentiment in the currency union dropped by 0.7 points to 105.5 according to the European Commission’s latest business and consumer survey. Economists had expected a score of 105.9.
The European Commission predicted in February that eurozone economic growth would accelerate to 0.3 per cent quarter-on-quarter in the three months to the end of March, from 0.2 per cent in the final three months of 2018. However, the latest sentiment figures suggest that this growth forecast is likely to prove to be overoptimistic.
In the meantime, at the annual European Central Bank Watchers conference in Frankfurt, ECB president Mario Draghi said that the bank’s monetary policy stance remained accommodative in the face of a weaker growth outlook for the eurozone and that the weakness in external demand is unlikely to be severe.
Mr Draghi also hinted that the ECB is starting to worry about the adverse effects that negative interest rates are having on the banking sector, adding that the central bank is ready to soften the impact of this policy if it is found to harm the transmission of its monetary policy. Negative interest rates are a controversial policy tool the ECB introduced almost five years ago to encourage European banks to lend.
Finally, in Germany, a closely-watched survey by Ifo institute showed that business confidence in Germany is improving after six months of declines, allaying fears of a recession in Europe’s largest economy. The monthly confidence index rose to 99.6 in March from 98.7 in February.
Business participants’ assessment of their current situation improved slightly, while their optimism for the next six months was significantly higher.
Germany has seen a series of disappointing economic data and forecasts in recent months, with its performance held back by one-time factors related to new car emissions standards, Brexit uncertainty and concerns over global trade disputes. However, the economy is considered to be in generally robust state.
This report was compiled by Bank of Valletta for general information purposes only.