FX.co ★ Eurozone Economic Sentiment Weakens In March

Eurozone economic sentiment weakened slightly in March due to lower confidence in industry, retail trade and construction, survey results from the European Commission showed on Thursday.

The economic confidence index unexpectedly fell to 99.3 in March from 99.6 in February. The score was forecast to rise to 99.8.

Reflecting a further setback in managers' production expectations, industry confidence lost momentum in March. The corresponding index slid more-than-expected to -0.2 from +0.4 in the previous month. The score was seen at +0.2.

At the same time, the services confidence remained almost unchanged in March. The index stood at 9.4 compared to 9.5 in February. The marginal decline confounded economists' forecast of an improvement to 10.3.

Retail trade confidence relapsed in March driven by a further increase in the assessment of the volume of stocks. At -1.4, the decline in the index deepened from -0.2 in February.

After five consecutive months of improvement, consumer sentiment weakened as initially estimated. The confidence index fell to -19.2 from -19.1 in the prior month.

Driven by a deterioration of managers' employment expectations, the construction confidence index dropped to 1.0 in March from 1.6 in February.

Further, there was an incremental drop in the employment expectations indicator due to the deteriorated hiring plans for managers in retail and construction.

Selling price expectations dropped in industry, construction, services and retail trade, the survey showed.

The small drop in the economic sentiment indicator in March still points to an increase in GDP in the first quarter, Capital Economics economist Giulia Bellicoso said.

Meanwhile, firms' selling price expectations suggest that core inflation might be approaching a peak, but they remain very high, the economist noted. So the core rate looks set to ease gradually.

However, ING economist Bert Colijn said the small drop in the economic sentiment is at odds with the PMI and suggests a relatively weak economic activity in March. ING remains cautious about euro area GDP growth for the first quarter.

Earlier this month, the European Central Bank had projected the currency bloc to grow 1.0 percent this year and 1.6 percent over the next two years.