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Eurozone Economic Sentiment Deteriorates To 3-Month Low

Euro area economic confidence weakened unexpectedly to a three-month low in February, suggesting that the currency bloc remains close to recession, monthly survey data from the European Commission showed on Wednesday.

The economic sentiment index fell to 95.4 from revised 96.1 in the previous month. The score was forecast to rise to 96.7.

At -9.5, the industrial confidence indicator hit the lowest in six months. The reading was expected to rise to -9.2 from -9.3 in January.

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Similarly, the services sentiment index dropped to a three-month low of 6.0 from 8.4 a month ago, while the score was seen rising to 9.0.

By contrast, the consumer confidence index improved to -15.5, as initially estimated, from -16.1 in January.

Confidence among retailers and contractors deteriorated in February.

The retail confidence index posted -6.7, down from -5.6 a month ago. The construction sentiment index eased to -5.4 from -4.6.

The Employment Expectations Indicator remained broadly stable in February. The index gained 0.2 points to 102.5.

The score reflected lower employment plans among industry, services and construction managers, counterbalanced by markedly improved employment plans in retail trade.

Further, the survey showed that selling price expectations decreased in all four business sectors. The drop was marked in services, retail trade and construction, while very mild in industry.

Today’s survey reinforces the message that the economy is close to recession, Capital Economics’ economist Andrew Kenningham said.

Although price pressures in the services sector eased slightly, they remain uncomfortably high, the economist noted.

It is too high for the European Central Bank to consider an early shift towards interest rate cuts, added Kenningham.

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