European business and consumer confidence plummeted at a record rate in April due to the coronavirus crisis, according to the EU’s main economic sentiment indicator which has fallen close to the all-time lows of the financial crash a decade ago.
After recording “an exceptionally strong fall in confidence among consumers and in all the business sectors” the European Commission said its overall economic sentiment indicator fell by 28.8 points to 65.8 across the EU in April.
The fall was likely to have been even more severe than the data suggested, the Commission said, because its survey could not be carried out in Italy, which imposed a severe lockdown on its inhabitants after suffering the heaviest death toll because of coronavirus.
The figures came as the German government announced that it expected its economy to shrink 6.3 per cent this year, although it forecasts a rebound of 5.2 per cent next year. Private household consumption will fall by 7.4 per cent this year while exports will drop 11.6 per cent, according to the figures.
The number of people in work in Germany will fall to 44.9m, from 45.3m in 2019, the government said, while the number of unemployed people will increase to 2.62m this year, up from 2.27m in 2019.
Among the largest eurozone economies, the European Commission’s sentiment indicator fell the most in the Netherlands, where it was down by 32.6 points, while Spain’s fell 26 points, Germany was down 19.9 points and France declined 16.3 points.
The Commission said that “in many countries the response rate was lower this month than usual”, adding that the results of the survey “may be less accurate and comparable across countries than usual”.
Confidence among companies in the services sector fell 32.7 points to its lowest ever level, “driven by record-breaking deteriorations in expected demand but also in the assessment of the past business situation and past demand”, the Commission said.
Confidence in the industrial sector was down by a record 19.2 points but remained above all-time lows seen in 2009, while retail trade confidence dropped 19.7 points. The construction industry was slightly more positive, with sentiment falling 15.1 points, while financial services sentiment “fell like a stone” and was down 49.3 points, according to the Commission.
The survey also found employment expectations among companies sank by 30.1 points to a record low in April, pointing to a sharp increase in unemployment in the coming months.
“The lockdown measures disrupt retail and other services even more than manufacturing and construction,” said Florian Hense, economist at Berenberg. “Unemployment will surge significantly despite powerful automatic stabilisers, including widespread job retention schemes.”
Retail sales in Spain fell at a record pace of 15.3 per cent in March, according to separate figures published by the national statistics agency on Wednesday that underlined how deeply economic activity has declined and provided the first economic data on the impact of the closure of non-essential shops and businesses.
The decline came despite an 8.4 per cent rise in Spanish food spending, as purchases of non-food items dropped by 32 per cent. Spain’s statistics office also reported a drop in employment for the retail sector which was steepest in smaller shops.
On a more positive note, the European Central Bank said that bank lending to businesses had continued to grow as the coronavirus hit the region in March, helped by extraordinary liquidity and capital relief measures from the central bank.
Loans to non-financial corporations increased by 5.4 per cent in March, up from 3 per cent in February. Loans to households grew by 3.4 per cent in March, down from 3.7 per cent growth in the previous month.
