Eurozone economic sentiment suffers worst monthly slump ever
By Michele Maatouk
Date: Monday 30 Mar 2020
(Sharecast News) - Economic sentiment in the eurozone suffered its worst ever decline in March as worries about the coronavirus took their toll, according to a European Commission survey released on Monday.
The economic sentiment index (ESI) fell to 94.5 points in March from 103.4 in February. This marked the worst drop since records began in 1985, while the overall figure is now the lowest since September 2013. Still, it was above expectations for a reading of 91.6.
In terms of countries, sentiment fell across the board, with a particularly sharp decline in Italy.
Jack Allen-Reynolds, senior Europe economist at Capital Economics, pointed out a few problems with the ESI.
"First, the press release notes that in many countries, the vast majority of responses were received before virus containment measures were enacted. And second, although the EC survey was consistent with the PMIs in showing that sentiment has fallen more quickly in services than in manufacturing, the ESI gives services and retail together a weight of just 35%.
"That compares to their weight of about 75% in gross value added. So even if April's ESI falls further, as seems certain, it might still underestimate the decline in activity."
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "This headline isn't pretty, but it is old news at this point given the already-bleak message from the PMIs, and national surveys, released earlier in the month. It was also a good deal better than the consensus.
"The headline was pulled lower mainly by sharp weakness in services, at -2.2 compared to 11.1 last month, but industrial confidence also weakened. Confidence weakened across all the major economies, but it crashed outright in Italy, consistent with the fact that lockdowns here were imposed earlier and tighter than elsewhere.
"Looking ahead, we expect more of the same in the next few months as governments keep the vice in position to fight the Covid-19 outbreak. Overall, the EC sentiment points to only a modest reduction in GDP at this point, but the reality likely is much worse."
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