Eurozone consumer confidence worsens

Eurozone consumer confidence fell to a five-month low in January as the single currency area struggled to contain a sovereign debt crisis, the latest EU statistics have shown.

The European Commission said in a flash estimate that consumer morale in the 17-country currency area was at -11.4 in January, down from -11.0 in December.

In the wider 27-nation European Union, consumer sentiment declined to -12.8 from -12.1.

Ben May of Capital Economics said the news would “further dent hopes of a sustained consumer recovery this year.”

“The hard data on household spending have recently been pretty disappointing. And given that the fiscal squeeze has not got going properly yet in the core and wage growth is likely to slow across the region this year, we continue to think that a sustained consumer revival is unlikely in 2011,” he said.

Analysts say strong demand is crucial for making eurozone economic growth self-sustaining – but austerity measures ordered by many governments, as well as turmoil on financial markets, limits such consumer demand.

"It is likely that higher inflation and the increasing fiscal squeeze in many countries is increasingly weighing down on confidence," said Howard Archer, chief European analyst at IHS Global Insight.

"In addition, consumers are likely worried that the euro zone's heightened sovereign debt problems could increasingly feed through to hurt economic activity," he added.