Ukraine crisis hits euro-zone business confidence
Frankfurt (Apr 29) Businesses across the 18 countries that share the euro lost some of their recently recovered optimism during April, likely reflecting growing tensions between the European Union and Russia over the latter's annexation of Ukraine's Crimea peninsula.
However, consumers continued to become more upbeat about their prospects, buoyed by a more upbeat assessment of the jobs market and the expectation that price rises will be smaller over coming months than they have been for some time.
The European Commission Tuesday said its headline Economic Sentiment Indicator--which measures confidence in a number of business sectors and among consumers--fell to 102.0 from 102.5 in March, its first decline since April 2013. That was a surprise, with the consensus forecast of 16 economists surveyed by The Wall Street Journal last week having been for a rise to 103.0.
The decline in business confidence was broad based, with the national ESIs falling in Germany, France, Spain and the Netherlands. Outside the euro zone, the ESI also fell in Poland and Romania, both of which share a border with Ukraine.
The European Union this week joined the U.S. in imposing additional sanctions against Russia for its actions towards Ukraine. But U.S. and European officials said they held off targeting broad sectors of Russia's economy, including its energy, banking and military industries, due to fears of an economic backlash and concerns that such measures could undermine diplomatic efforts to cooperate with Russia in stabilizing Ukraine.
Confidence fell in all of the euro zone's five business sectors, and while rising tensions over Ukraine likely explain some of that loss of optimism, there was also evidence that the euro's appreciation was weighing on manufacturers.
The euro-zone measure of confidence in industry fell to -3.6 from -3.3, confounding expectations that it would rise to -3.0. Manufacturers reported a deterioration in export order books, while in a quarterly survey, they said they are now less competitive on world markets than three months ago.
The ESI for the 28-member EU rose to 106.2 from 105.3, driven almost entirely by a surge in British optimism. The U.K.'s ESI jumped to an all-time high of 119.5 from 112.8 in March.
