Euro-Area Economic Confidence Slumps Amid New Virus Restrictions

Economic confidence in the euro area fell sharply in November, the first deterioration in seven months, after governments imposed new restrictions to halt the spread of the coronavirus.

A European Commission sentiment index dropped to 87.6 from 91.1 the previous month, with retailers, services providers and consumers particularly pessimistic. An indicator for employment expectations declined for a second month.

Euro-Area Economic Confidence Slumps Amid New Virus Restrictions

Many governments took new steps to curb economic activity in November, threatening to pitch the currency bloc back into a slump in the final quarter. Germany extended its partial lockdown until at least Dec. 20, while France is planning to keep restaurants closed until a month after that.

According to the survey, retailers’ expectations “nosedived,” reflecting growing concerns among households about their future financial situation and the economic outlook. Services were most worried about expected demand, while industry and construction only registered “comparatively mild” slips in sentiment.

Progress on vaccines has instilled some hope that the pandemic could be brought under control over the course of next year, though questions remain about how quickly they can be rolled out to sufficient parts of the population.

Euro-Area Economic Confidence Slumps Amid New Virus Restrictions

The European Central Bank is preparing to step up monetary stimulus at its December meeting in a bid to keep credit flowing to businesses and households suffering another hit to their incomes.

Governments are also racing to limit the damage to the economy by expanding or extending fiscal measures. A plan at the European Union level meant to spur a recovery over the longer term, on the other hand, is held up as member states squabble over key details.

©2020 Bloomberg L.P.

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