Euro-area businesses lose confidence as economy hits soft patch

FRANKFURT • German business confidence slid to the lowest level in more than a year and sentiment also deteriorated in Italy and France, signalling the global economic slowdown is starting to affect the eurozone.

The Ifo Institute’s gauge of business climate in Europe’s largest economy fell to 102.1 in March, missing economist estimates and marking the fifth month of declines.

In France and Italy, measures tracking confidence also fell, highlighting the risks facing the region’s companies as growth appears to come off its peak and threats of a global trade war loom.

“If we look at the international environment, there are some sobering news coming in — the worldwide economy is cooling a little bit and that is reflected in orders,” Clemens Fuest, president of the Ifo Institute, said in a Bloomberg Radio interview after the release.

“We can see this cooling down in other countries as well — we see it in the entire eurozone.”

The confidence data follow a series of reports that have hinted at momentum in the euro area taking a breather just as policymakers at the European Central Bank (ECB) prepare to pare back some of their extraordinary stimulus later this year. While president Mario Draghi said in March that strong growth was helping the ECB to achieve its inflation goal, he is set to be grilled after tomorrow’s policy update on whether the latest figures have altered the outlook.

One piece of good news came from the ECB’s Bank Lending Survey, which showed increased loan demand from enterprises and households.

In Germany, the Bundes bank has also expressed confidence, saying the country’s boom is set to continue even amid softer growth.

A gauge of activity in Europe’s largest economy on Monday signalled that the recent weakness is levelling off, while a Purchasing Managers’ Index for the euro-area, indicated that economic momentum kept a steady pace in April after slowing earlier in the year.

An additional challenge facing the region’s exporters is the prospect of a brewing US-China trade war. Metal tariffs could impact German carmakers such as Daimler AG and BMW AG, which are estimated to ship more than 100,000 vehicles from the US to the Asian country. Companies from Airbus SE to Puma SE have cited potential trade restrictions as well confusion around the future shape of the UK’s relations with the European Union as risks for business. — Bloomberg