Consumers in the 17 countries that use the euro became significantly more gloomy about their prospects in December as the currency area's fiscal crisis deepened, a growing number of governments embarked on tough austerity programs, and a recession threatened.
The European Commission Wednesday said the preliminary results of its monthly sentiment survey indicated that its headline measure of consumer confidence fell to -21.2 from -20.4 in November, the sixth straight month of decline.
As in previous months, the decline likely reflected growing concerns about the outlook for the economy and the job market, although the commission won't give a detailed breakdown until early next year.
"Increased fiscal tightening...rising unemployment, heightened and persistent...sovereign risk tensions and financial market turmoil are proving a poisonous cocktail for consumer confidence," said Howard Archer, an economist at IHS Global Insight. "In addition, purchasing power is currently still being squeezed appreciably in a number of countries by elevated inflation and muted wage growth."
The continued weakening in confidence suggests that consumers are unlikely to increase spending in coming months, depriving the economy of needed support at a time when governments are cutting spending.
Recent surveys of business activity have indicated that the euro-zone economy will likely contract this quarter, while official figures show gross domestic product in six euro-zone members was already in decline during the third quarter, while it was stagnant in two other members.
In response to the threat of a renewed recession, the European Central Bank cut its key interest rate in both November and December, but that doesn't appear to have reassured consumers. Nor have the actions of euro-zone leaders, who Dec. 9 agreed the latest in a series of strategies to try to bring the fiscal crisis to an end.
However, not all euro-zone consumers are equally downbeat. A survey released Tuesday showed German consumer confidence will hold up in January as unemployment falls in the currency area's industrial powerhouse.
And business sentiment appears to be less affected by the deepening crisis. Figures released Tuesday showed Germany's closely watched Ifo business-confidence index rose in December as firms said their economic expectations improved and they assessed the current business situation as favorable. A similar survey released Wednesday showed Belgian business confidence improved from November, the first pickup in nine months in the wake of the formation of a long-awaited new government.
"Considering the other business surveys that also rose in December, today's print in the Belgium business confidence is...consistent with our view that these readings rather reflect a tentative stabilization of business indices in the euro area towards the end of the year, although we do not see them embodying a turnaround," said François Cabau, an economist at Barclays Capital.
In the 27-member European Union, confidence also weakened sharply, with the headline measure down to -21.9 from -20.7. A survey released earlier Wednesday showed consumer confidence declined in the U.K., the largest economy outside the euro zone.
http://online.wsj.com/article/SB10001424052970204464404577112363519772888.html
The European Commission Wednesday said the preliminary results of its monthly sentiment survey indicated that its headline measure of consumer confidence fell to -21.2 from -20.4 in November, the sixth straight month of decline.
As in previous months, the decline likely reflected growing concerns about the outlook for the economy and the job market, although the commission won't give a detailed breakdown until early next year.
"Increased fiscal tightening...rising unemployment, heightened and persistent...sovereign risk tensions and financial market turmoil are proving a poisonous cocktail for consumer confidence," said Howard Archer, an economist at IHS Global Insight. "In addition, purchasing power is currently still being squeezed appreciably in a number of countries by elevated inflation and muted wage growth."
The continued weakening in confidence suggests that consumers are unlikely to increase spending in coming months, depriving the economy of needed support at a time when governments are cutting spending.
Recent surveys of business activity have indicated that the euro-zone economy will likely contract this quarter, while official figures show gross domestic product in six euro-zone members was already in decline during the third quarter, while it was stagnant in two other members.
In response to the threat of a renewed recession, the European Central Bank cut its key interest rate in both November and December, but that doesn't appear to have reassured consumers. Nor have the actions of euro-zone leaders, who Dec. 9 agreed the latest in a series of strategies to try to bring the fiscal crisis to an end.
However, not all euro-zone consumers are equally downbeat. A survey released Tuesday showed German consumer confidence will hold up in January as unemployment falls in the currency area's industrial powerhouse.
And business sentiment appears to be less affected by the deepening crisis. Figures released Tuesday showed Germany's closely watched Ifo business-confidence index rose in December as firms said their economic expectations improved and they assessed the current business situation as favorable. A similar survey released Wednesday showed Belgian business confidence improved from November, the first pickup in nine months in the wake of the formation of a long-awaited new government.
"Considering the other business surveys that also rose in December, today's print in the Belgium business confidence is...consistent with our view that these readings rather reflect a tentative stabilization of business indices in the euro area towards the end of the year, although we do not see them embodying a turnaround," said François Cabau, an economist at Barclays Capital.
In the 27-member European Union, confidence also weakened sharply, with the headline measure down to -21.9 from -20.7. A survey released earlier Wednesday showed consumer confidence declined in the U.K., the largest economy outside the euro zone.
http://online.wsj.com/article/SB10001424052970204464404577112363519772888.html
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