Euro-area economic confidence falls for 2nd month

By BLOOMBERG

ZURICH • Euro-area economic confidence slipped in February, the latest number to show momentum in in the region is taking a breather after the best year in a decade.

The European Commission’s index of sentiment fell to 114.1 from 114.9, broadly in line with expectations. That’s the second consecutive monthly decline after the index touched a 17-year high in December. The business climate measure also declined, falling to the lowest since October.

The report continues a run of disappointing numbers from the 19-nation currency bloc. Business confidence in Germany fell the most in more than five years in February, while the euro-region Purchasing Managers Indexes showed manufacturing and services activity weakened more than forecast.

The commission report showed that economic sentiment declined in Germany, France and Spain, though it rose in Italy, suggesting the election this weekend hasn’t put a damper on confidence.

With most eurozone indicators still at high levels, European Central Bank president Mario Draghi is maintaining an upbeat view, telling European lawmakers on Monday that the economy is expanding robustly. Expansion of 2.3% is forecast for this year, not far from the 2.5% pace reached in 2017, and strong global growth is boosting demand.

Among the companies benefitting is Siemens AG, which recently reported a 14% surge in orders.

For the ECB, the key question is how this feeds through to inflation, which remains below the bank’s goal of just below 2%. Inflation in Germany probably slowed this month, and data today is forecast to show the euro-region rate fell to just 1.2%.

Draghi has underscored that the upswing is still heavily dependent on monetary support.

While policymakers are debating how to chart their exit from their quantitative-easing programme and record-low interest rates, they opted against adjusting forward guidance at their January meeting, agreeing instead that the stance remained “broadly appropriate”.