The economic sentiment indicator fell by 0.7 points in the eurozone to 84.5 in October, the lowest level since August 2009, with market decreases in industry and construction, official data showed on Tuesday.
Confidence in industry fell by 2.1 points in the euro area, mostly due to a “much more negative assessment of the current level of overall order books,” as well as to worsening production expectations and stocks of finished products, the data showed.
Confidence in the construction sector decreased in the euro area by 1.3 points, and employment plans were revised downwards by retail trade, construction, industry and services managers.
Industrial managers in the eurozone reported a marked decrease in their assessment of new orders and export volume expectations in the quarterly survey of the manufacturing industry carried out in October.
The balance of managers reporting more than sufficient rather than insufficient production capacity increased further, the data showed, while capacity utilization decreased accordingly, to 76.8% in the eurozone. The eurozone is the biggest trading partner for many emerging economies and policy makers in those countries have told Emerging Markets during the IMF/World Bank meetings in Tokyothat their biggest worry was the slowdown caused by the eurozone’s debt crisis.
The data “supported other evidence that the economy started the fourth quarter on a very weak note,” Jennifer McKeown, senior European economist at Capital Economics, said in a market note.
The economic sentiment indicator now points to an annual contraction of 2.5% in the eurozone, she said.
INDUSTRIAL SENTIMENT DOWN
“Worryingly sharp” falls in industrial output of over 6% are likely, judging by the decline in industrial sentiment, McKeown said.
“Overall, the survey confirms that the eurozone is heading into a deep recession, which will hit the core economies as well as the periphery,” she said.
Retail sales, which have been falling for 12 months, accelerated their slide in October, with the eurozone retail PMI falling back to 45.3 in October from September’s 47.1 and below the 46 average for the third quarter, Markit data showed.
The eurozone retail PMI figures are based on responses from the three biggest economies in the euro area and “the overall acceleration in the month-on-month pace of decline across the eurozone retail sector reflected stronger falls in both France and Italy,” Markit said in a statement.
In Italy, retail PMI, which has been contracting for 20 months, registered another rapid decline while Germany bucked the trend with a marginal increase in sales for the first time in 3 months.
The data showed that demand for new goods for resale remained weak, as the value of purchases by retailers fell further, but, despite this, average wholesale prices continued to increase sharply, with the strongest cost pressures in the food and drink sectors, followed by clothing and footwear.
“The eurozone retail sector entered the fourth quarter in a deepending slump,” Trevor Balchin, senior economist at Markit, said.
“Sales have now fallen for 12 consecutive months, and there is little sign of an imminent return to growth,” he added.