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.

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. Germanyextended its partial lockdown until at least Dec. 20, while France isplanning 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.

The European Central Bank is preparing tostep 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.

Read more:
  • ECB’s Lane Sounds Alarm on Worrying Financing Conditions
  • Upcoming ECB Decision Aims to Keep Credit Flowing in Pandemic
  • World Economy Teeters Near New Slump, Defying Vaccine Optimism

— With assistance by Harumi Ichikura, and Kristian Siedenburg

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