Europe’s Economic Confidence in Freefall
11-01-2008 16:30
October 2008 has been the gloomiest month since the early 1990s with regard to economic outlook in Europe, according to the latest European Commission Economic Sentiment survey. The survey shows a drop of 7.4 points in October, the biggest month-on-month fall ever. The economic sentiment index currently stands at 77.5 points, the lowest since 1993. The reading covers a bloc of 27 countries.
Fears of export drop; unemployment
The global financial turmoil seems to have drained confidence across the board, from industry players to consumers, the survey shows. Fears of fall in exports and rise in unemployment figures seem to be looming large in people’s minds.The European Central Bank is expected to announce an interest rate cut of .5 percentage points next week, and it is largely feared that this will only herald more cuts, given the declining interest rates. Market observers feel by mid 2009, interest rates in Eurozone will be close to the 2 percent nadir last touched in 2003.
Worst still round the corner?
And the worst is yet to come, believes Julian Callow, European economist at Barclays Capital. He says the economic impact of the financial crisis is still unclear, and the latest ratings could well be only a partial reflection of the pessimism in market sentiment.Confidence in the Netherlands seems to have taken the hardest hit, followed by France, Italy, the UK and Poland.
Soaring oil prices, a strong Euro and steep official borrowing costs had already mired Europe’s economies before the current financial downturn pulled them deeper into troubled waters. The original limiting factors have eased, but the greatest danger now is that companies will scrap investment proposals and consumers will draw their purse strings tighter, leading to a further dip in confidence levels and setting up a vicious cycle.
