PARIS • Euro-area economic confidence extended its worst losing streak in a decade at the start of 2019 as member states faced a variety of domestic frailties and trade uncertainties.
The European Commission’s economic sentiment index dropped more than economists forecast in January, reaching the lowest in more than two years. Pessimism spread in industry, services and retail trade, while the mood among consumers improved slightly.
The euro-area has turned into a weak spot of the world economy. The European Central Bank acknowledged risks have “moved to the downside” and when the International Monetary Fund cut its global growth forecast this month, Germany and Italy had the biggest downward revisions.
US Federal Reserve (Fed) chairman Jerome Powell was scheduled to offer his view of the US and global outlooks at a press conference yesterday. The Fed is expected to keep policy unchanged and emphasise patience in raising interest rates.
France, the euro-area’s second-largest economy, earlier yesterday reported a disappointing domestic performance in the fourth quarter (4Q) of 2018. A surge in exports boosted economic growth to 0.3%, but household expenditure — the traditional engine of the French economy — stagnated. A separate report showed a huge plunge in December alone, when retailers were dogged by violent Yellow-Vest protests.
The euro was little changed as of 11:10am Frankfurt time yesterday, as was the Stoxx Europe 600 Index.
The Italian economy probably slipped into recession at the end of 2018 — a destiny Germany only narrowly avoided after eking out modest growth in the 4Q. Spain has held up well so far, with growth forecast to exceed 2% this year. Eurostat will report 4Q GDP figures for the euro-area today.
In January, sentiment increased in France and Spain, while it worsened in Germany, and — more significantly so — in Italy and the Netherlands.
In a sign that weaker global growth has started to bite, euro-area industry orders — particularly those from abroad — slumped at the start of the year.
Osram Licht AG, a German manufacturer of lights, has said ongoing trade conflicts, weak growth in China and general political uncertainties hurt 1Q revenue.
In France, retailers including Fnac Darty, Casino and Carrefour have cited the effect of unrest and store closures related to the Yellow Vests. — Bloomberg