Eurozone Economic Confidence Falls to Record Low in December

Economic confidence in the euro zone declined in December 2008 to its lowest level in at least 23 years, a survey from the European Commission showed Thursday.

The economic sentiment indicator (ESI) in the 15-nation bloc sharing the euro fell by 7.8 points to 67.1 in December, the lowest level since the survey began in January 1985, following a fall of 5.1 points in the previous month.

In the 27-nation European Union (EU), the monthly indicator, based on business and consumer surveys, also dropped by a sharp seven points in December to 63.5, a record low since January 1985.

The surveys are conducted in different sectors of the economy, namely industry, services, construction and retail trade, as well as among consumers.

In both the EU and the euro zone, the decline in the overall ESI reflected a general decrease in sentiment.

The industrial and consumer confidence indicators fell significantly again and reached their lowest level since January 1985 in both regions. The services confidence indicator marked a new record low for both regions since the introduction of the survey twelve years ago.

Sentiment in the retail sector declined considerably in both the EU and euro zone, and is now also at a record low in the EU. The construction confidence indicator also dropped markedly, by three points in both regions, though it is still above its all-time low reached in October 1993.

Reflecting the widespread deterioration in economic sentiment, all EU countries reported weakening sentiment. Among the large member states, confidence in the Netherlands fell the most, down by 13.2 points, followed by Italy, France, Spain and Germany, down by 9.9, 8.2, 6.3 and 5.3 points respectively.

The confidence indicator fell less significantly in Britain by 0.6 point, but it stood at its lowest since 1985.

Meanwhile, the business climate indicator (BCI) for the euro zone also fell more markedly in December than the previous month and reached its lowest level since January 1985, the commission said in a separate survey.

"The continued steep decline of the indicator signals a deteriorating trend in year-on-year industrial production growth, which is likely to turn out clearly negative in the fourth quarter," the commission said.

All five underlying components of the BCI deteriorated. Managers reported a sharp fall in the production trend observed in recent months while stocks of finished goods increased. Their assessment of the current overall order books and export order books was increasingly negative.

Looking ahead, production expectations in the euro zone have worsened notably compared to last month and are at their lowest level since 1985.

Worsening confidence has strengthened widespread fear of a deeper recession in Europe.

Final estimates released Thursday by the EU's statistics bureau Eurostat confirmed that the eurozone economy plunged into a recession in the third quarter of last year.