March — MNI analysts survey — Feb Revised from
lowest median highest
———————————————————————-
Econ Sentiment 107.3 106.9 107.3 108.3 107.9 107.8
Industry 6.6 5.5 6.0 7.1 6.6 6.5
Services 10.8 9.0 9.5 10.0 11.2 11.1
Consumers -10.6 -11.0 -10.6 -9.6 -10.0 —
Retail -1.5 na na na -0.2 —
Construction -25.0 na na na -24.2 -24.3
———————————————————————-
Business Climate: +1.41 na na na +1.46 +1.45

PARIS (MNI) – Economic morale in the Eurozone eroded much as
expected in March, with declines in all main sectors except for
industry, the European Commission said Wednesday.

After recovering in February from the first dip in two years, the
Commission’s sentiment indicator fell back 0.6 point in March. Other
leading Eurozone indicators may be peaking as well, even before there is
direct fallout from the devastating blow to Japan’s economy.

Sales price expectations continued to climb in all sectors, led by
services, to stand above long-term averages everywhere except for
construction. An acceleration in factory-gate prices (61.4) was also
flagged by the March PMI poll, while services sector fees slowed
slightly (52.5).

Among the larger economies, declines in the Commission’s overall
sentiment index in March were limited to Spain (-3.0 points) and Germany
(-0.7 point), while gains were registered in the Netherlands (+3.1
point), France (+0.9 point) and Italy (+0.1 point). The index remained
above its long-term average everywhere except in Spain, Portugal, Greece
and Cyprus. (Results for Ireland were not available.)

Contrary to most analysts’ forecasts for a decline, industry morale
stabilized in March, although recent production growth was judged
slightly weaker and output expectations fell back more than two points.
Firms said total order books were fuller, despite a marginal
deterioration for export order books.

The Commission’s separate Business Climate Indicator slipped 0.05
point in March to 1.41, as producers’ weaker assessment of recent and
expected production and of export order books offset a higher rating for
total order books and finished goods stocks.

Still, at a level very close to historical peaks, the indicator
suggests “that the recovery in industry will continue in the coming
months,” the Commission said.

The Eurozone factory PMI also retreated somewhat this month (57.7)
from the 10-year high hit in February (59.0), as both production (58.9)
and new orders (58.1) lost a little steam.

The Commission’s index of services sentiment fell 0.4 point to
stand 0.9 point below the long-term average. Providers reported weaker
gains in recent turnover and demand but expected demand to recover in
the near term.

Confidence in financial services, which is not seasonally adjusted,
dropped 5.8 points to a three-month low, reflecting a further slowdown
in recent business and expectations for weaker demand ahead.

By contrast, the services PMI gained 0.1 point in March to a
42-month high (56.9), despite a modest slowdown in new business (56.0)
and a more marked erosion in longer-term expectations (66.8).

The Commission’s flash estimate for consumer sentiment was
confirmed to show a 0.6-point downturn from March, still leaving the
index above the long-term average. While unemployment concerns eased
after a recovery in February, expectations for the overall economy fell
back to a five-month low.

Consumers reported a further marked pick-up in recent inflation and
expected the trend to continue over the coming year, boosting the index
well above the long-term average. As a result, they expected their
financial situation to deteriorate and thus to be able to save less and
spend less on big-ticket items.

By contrast, near-term sales expectations in retail improved. But
weaker recent turnover and rising stocks pulled down overall sector
sentiment by 1.3 points to a seven-month low, but still well-above the
long-term average.

Construction morale weakened as well, with the index slipping 0.8
point after two months of recovery. While builders said recent activity
continued to improve, approaching the long-term average, their
assessment of order books weakened after a marked improvement in
February.

Employment prospects improved in all sectors except retail and
construction, with a particularly strong rise in the financial services.
The indices were above long-term averages everywhere except in
construction.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

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