Eurozone consumer confidence dips in December

Economic sentiment in the EU has ‘markedly’ fallen in December, with the EU Commission’s economic sentiment indicator (ESI) down 2.2 points to 107.3 in the eurozone and falling 2 points to 107.6 across the whole bloc.

The deterioration of eurozone sentiment is the result of lower confidence among consumers and other key industries, including the services and construction sectors. However, sentiment slightly improved in the retail space.

The ESI across five of the eurozone’s largest economies – Germany, France, Spain, Italy and the Netherlands – went down.

Consumer confidence decreased by 2.3 points due to a deterioration of all its key components, such as consumers' unemployment and savings expectations, as well as their views on their financial general economic future; the decrease in the latter was particularly strong, the EU Commission said.

The lack of consumer confidence is a major cause for concern for the bloc, with consumer spending necessary to offset lower industrial output and a myriad of macroeconomic headwinds that are applying significant pressure on economic growth.

German recession on the cards

Industrial production across the board in Germany fell by 1.9% in November, signalling that Europe’s largest economy is slowing down.

‘Industrial output from Europe’s largest economy has been slowing down each consecutive month, since September 2018, with the drop accounting to 4.7% on an annualised basis,’ CEO and Founder of Sun Global Investments said.

‘The German economy is expected to be strained in the last quarter of 2018 as the weakness from Industrial output has also matched with a slump in German factory orders, down by 4.3% year-on-year in November.’

‘This is in line with global trends, as global risk factors have led to a cautious undertone in the markets. Unless a more welcoming approach is led, especially from the US, the cracks will only widen further globally,’ he added.

Eurozone GDP revised down

Despite all the negative sentiment emanating out of the EU at the moment, European equities are faring relatively well, with the Euro Stoxx 50, DAX and CAC 40 all seeing slights gains on Tuesday.

However, the euro took a slight tumble against the dollar on Tuesday morning, but later recovered.

‘Eurozone GDP estimates keep getting revised down, and there seems no let-up in the general malaise consuming the currency bloc,’ IG analyst Chris Beauchamp said.

‘The current bounce in equities still looks like one of those vicious bear market rallies, and the worsening eurozone economic outlook, combined with lack of easing from the European Central Bank, means that stocks in Europe are still facing a very tough future that suggests further falls are likely,’ he added.