Consumer confidence plummeted to a five-year low in the eurozone this month, according to new data from the European Commission that give a first glimpse of the economic toll that efforts to tackle the coronavirus pandemic are taking.
The commission’s eurozone flash consumer confidence indicator fell a record 5 points to minus 11.6, its lowest level since 2014 and below its long-term average. The wider gauge of EU consumer confidence dropped 4.5 points, back to its long-term average of minus 10.4.
Consumers are fearful about a wave of insolvencies and redundancies after governments from Italy to Germany imposed severe lockdowns on their populations to slow the spread of coronavirus, which has killed more than 15,000 people, more than half of them in Europe.
“Households are sure to become even more pessimistic in the coming months,” said Melanie Debono, Europe economist at Capital Economics, who forecast that eurozone unemployment would rise from 7.4 per cent in January to 9 per cent by July.
“Employment growth was already slowing before the crisis erupted and although governments are taking measures to keep people on the payroll, this will only limit, rather than prevent, the increase in unemployment,” said Ms Debono.
Unemployment in the eurozone has steadily fallen since it peaked at more than 19.3m people during the region’s debt crisis in 2013, and last year it sank to a 12-year low with 12.25m people out of work.
However, since many non-essential businesses across Europe have had to shut their doors and consumers’ movements have been tightly restricted, there are widespread fears that large numbers of people will need government support to get through the crisis.
German banks experienced a doubling of cash withdrawals from ATMs at the start of last week as people prepared for the worst.
In the latest sign of how fearful consumers are about the future, sales of gold and silver bars to retail investors have risen so sharply in the past two weeks that Europe’s largest gold refineries said they were struggling to keep up.
Economists have slashed their growth forecasts for this year. Credit Suisse on Monday predicted the eurozone economy would shrink 4 per cent this year, before growing 5 per cent next year.
