In May, European Commission’s economic confidence weakened for a second straight month, reaching the lowest level since October 2009. The headline index dropped from 92.9 to 90.6, while the consensus was looking for a more moderate drop (to 91.9). The sector breakdown shows that weakness was widespread across all sectors: retail (-18.1 from -11.1), construction (-30.1 from - 27.5), services (-4.9 from -2.4) and industrial (-11.3 from -9.0) confidence all deteriorated significantly. Consumer confidence, on the contrary, was confirmed at -19.3 (up from -19.9 in April). National details show that the deterioration was broad-based across both Northern and Southern European countries. Especially in Italy (78.8 from 83.1), the Netherlands (86.7 from 90.6) and Belgium (91.9 from 94.1) economic confidence worsened sharply from the previous month.
Although the outcome is disappointing, there is little new information in it, as earlier released confidence indicators showed a similar development. The outlook for the euro zone economy remains bleak with weakness ever more spreading from the debt-stricken Southern European countries to the core. After significantly picking up during the first quarter of the year, the growth rate of M3 slowed sharply in April.