Eurozone Economic Sentiment Slides in April
As market eyes recovery, the European Commission’s economic sentiment indicator unexpectedly declined in April on the back of a still struggling manufacturing sector.
The European Commission’s economic sentiment indicator fell to 95.6 in April from 96.2 in March. Industrial confidence (-1.6) fell back significantly.
Inventories slightly increased and the order book assessment strongly deteriorated, meaning that the manufacturing sector might still see a few months of subdued activity, ING said in a Monday note.
Analysts said employment expectations softened again.
“Even if the increased tensions in the Middle East had a negative impact on the assessment, the overall situation in manufacturing remains rather downbeat”, ING said.
Capacity utilisation (78.9%) fell to the lowest level since 2020. Confidence also dropped in the retail sector (-0.8), construction (-0.4) and services (-0.4).
That said, capacity utilisation in the services sector increased to 90.2% from 89.9% in the first quarter. This is clearly above the long-term average (89%). The employment expectations index for all sectors weakened to 101.8, albeit still above the long-term average of 100.
Analysts noted that consumer confidence increased in April to -14.7 from -14.9 in March, the third consecutive increase. Both the assessment of the financial situation over the past 12 months and expectations for the next 12 months climbed higher.
The decline in inflation and rising nominal wages are certainly contributing to this. However, the labour market seems to be losing some vigor, as employment expectations increased.
While the first quarter likely saw subdued GDP growth after two quarters of GDP contraction, the second quarter started on a softer footing.
“We still see a gradual recovery unfolding, as the inventory correction will likely come to an end around the summer months and real disposable income increases on the back of lower inflation, fueling household consumption”, ING said in its note. #Eurozone Economic Sentiment Slides in April
