Euro-area sentiment drops for 9th month

ZURICH • Economic confidence in the euro-area sank for a ninth month in March, suggesting the region’s slowdown hasn’t yet bottomed out.

Sentiment soured markedly in industry, and sharp drops in Italy and Germany highlight the precarious situation in two of the region’s largest economies.

With the former in recession and the latter narrowly avoiding one, the European Central Bank (ECB) cut its euro-area growth outlook this month and repeated a warning about downside risks.

The European Commission’s headline index, which assesses the mood of households and businesses, fell more than economists expected and is now at its lowest level in more than two years.

To grease the wheels for the economy, ECB officials announced new loans and committed to keep borrowing costs low for longer. Yet in the three weeks since then, figures have shown the contraction in Germany’s manufacturing sector worsened and business activity in France unexpectedly declined.

Even so, unemployment in the bloc is at the lowest in almost six years and there’s even evidence of wages rising, fuelling consumer spending. Bank of France governor Francois Villeroy de Galhau has stressed that the region is in a slowdown, not a recession, and the ECB’s chief economist said the situation shouldn’t worsen further.

“We are seeing a stabilisation of the economy right now, but it’s conditional on the development of a number of geopolitical uncertainties,” Peter Praet said in an interview, mentioning Brexit and international trade. “We are confident, but up to a point: Our scenario is based on the assumption that political uncertainties, if they don’t disappear fully, will at least be contained.” — Bloomberg