EuroWire, BRUSSELS: Economic confidence in the European Union and the euro area fell again in March, with the European Commission’s monthly sentiment gauges extending February’s decline as households and businesses turned more cautious. The Economic Sentiment Indicator dropped to 96.7 in the EU from 98.3 in February and to 96.6 in the euro area from 98.2. The Employment Expectations Indicator also weakened, falling to 97.3 in the EU and 96.4 in the euro area, leaving both measures below their long-term average of 100.
In the EU, the overall decline was driven mainly by a sharp deterioration in consumer confidence and a sizeable fall in retail trade sentiment, while services confidence eased slightly. Industry was broadly unchanged and construction improved modestly. Among the bloc’s largest economies, the sentiment indicator posted the biggest drops in France and Spain, with further declines in the Netherlands and Italy. Germany and Poland were broadly stable, underscoring that the March weakening was widespread but not uniform across the region.
Consumer confidence fell 3.4 points in the EU, reaching its lowest level in about two and a half years. The downturn reflected a marked slide in households’ expectations for the overall economic situation in their country, along with weaker views of their future finances and a lower willingness to make major purchases over the next 12 months. On jobs, the employment expectations gauge fell mainly because firms in retail trade, services and industry cut hiring plans, although construction managers became slightly more upbeat.
Consumers drive pullback
The March survey also showed higher price expectations across the economy. Managers’ selling price expectations increased sharply in all four business sectors and rose especially strongly in industry, moving further above long-term norms. Consumers’ perceptions of price developments over the previous year increased moderately, while their expectations for the coming 12 months surged. At the same time, the Economic Uncertainty Indicator rose by 3.0 points as businesses in industry, services and retail trade reported greater uncertainty and consumers signaled more concern about their future financial situation.
Within the sector detail, industry confidence edged up 0.2 point as better assessments of order books were largely offset by weaker production expectations and a less favorable view of finished product stocks. Services confidence slipped 0.4 point as managers reported softer demand expectations. Retail trade confidence fell 2.0 points, reflecting a steep drop in business expectations for the next three months, while construction confidence rose 0.7 point as builders reported improved order books and slightly stronger employment expectations.
Prices and uncertainty rise
The labour market component also softened. The EU employment expectations gauge fell 1.3 points, with retail trade accounting for the largest downward revision and additional weakness in services and industry. Consumer unemployment expectations, which are not part of the headline employment measure, worsened significantly. The EU Labour Hoarding Indicator, which tracks the share of managers expecting output to fall while employment remains stable or rises, increased to 9.9 from 9.4, moving above its long-term average of 9.6.
The Commission said the March findings were based on responses collected from March 1 to March 24 across surveys covering industry, services, retail trade, construction and consumers. Combined with February’s declines, the latest readings show sentiment and hiring expectations continuing to move away from historical norms as household sentiment weakened and business selling price expectations rose. The next flash consumer confidence estimate is due on April 22, followed by the full survey update on April 29.