Economic confidence in the Euro area witnessed an unexpected dip, reaching a three-month low in February. This trend suggests that the bloc is on the verge of a recession, as per the monthly survey data released by the European Commission.
The economic sentiment index plunged to 95.4, down from a revised 96.1 the previous month, contradicting expectations of an increase to 96.7. Furthermore, the industrial confidence index, at -9.5, weathered a six-month trough. Analysts expected a rise to -9.2 from -9.3 in January.
The services sentiment index also followed the same trend, decreasing to a three-month low of 6.0 from 8.4 a month earlier. The figure was anticipated to surge to 9.0. In contrast, the consumer confidence index recorded an improvement, advancing to -15.5 from -16.1 in January, as previously estimated.
Confidence among retailers and building contractors suffered a blow in February. The retail confidence index declined to -6.7 from -5.6, while the construction sentiment index softened to -5.4 from -4.6.
However, the Employment Expectations Indicator remained largely unchanged, marginally climbing 0.2 points to 102.5. This score represents a decrease in employment plans among managers in industries, services and construction, offset by a significant improvement in retail trade.
Additionally, the survey revealed a decrease in selling price expectations across all business sectors, with a significant decline in services, retail trade and construction. Conversely, the industry sector reported a minor slump.
"Today's survey underscores the reality that the economy is on the brink of a recession," stated Capital Economics' economist Andrew Kenningham. He further noted that although price pressures in the services sector have somewhat lessened, they still remain worryingly high. Kenningham added that the figures were too high for the European Central Bank to consider an early shift towards interest rate cuts.
