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Eurozone Economic Sentiment Plummets

James Boston
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Eurozone Economic Sentiment Plummets

Economic sentiment continues to deteriorate in the Eurozone according to the latest September report from Germany’s Zentrum für Europäische Wirtschaftsforschung (ZEW). The current reading just announced of 14.2 represents a sharp fall from August’s 23.7, it also surprised markets that had been anticipate a pull back but only to the region of 21.3. The index has been falling consistently for a number of month’s but has so far managed to remain above the 0.0 line which represents the difference between an optimistic and a pessimistic economic outlook. The current rate of decline, if maintained, will see the indicator turn negative over the next two months.

The German institute also compiles a similar index for the home country and it is a major contributor to the overall Eurozone version of the index. The German ZEW figures for this month have also taken markets very much by surprise. The key ZEW Confidence Index has fallen to a 21 month low and now reads at 6.9 for September, this indicator has dropped from the 8.6 recorded in August but not by as much as anticipated, market analysts had been expecting a reading of 4.8 this month. The German version of the ZEW Current Situation Survey however has dropped substantially on the month. August’s 44.3 reading had been expected to pare back to around 40.0 but instead confounded market watchers by coming in at just 25.4. Much of the fall off in German sentiment is being attributed to the geopolitical situation in the Ukraine and the uncertainty around how far the sanctions battle will go, Germany is being particularly hard hit by the economic standoff with Russia due to the level of trade and investment links between the two nations.

Additionally, the Eurozone received an update to Labour Cost this morning, the August year on year rise now stands at 1.20%, this is an acceleration in the rate of growth from the previous reading of 0.60%. The corresponding Wages Index has risen to 1.20% also, from 1.00% previously.

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