Relapse for consumer confidence in the Eurozone, as trade deficit grows

HOPES for a retailing resurgence across the Eurozone took a hit yesterday, with news that consumer confidence has dropped more sharply than expected.

In November the confidence index rose to a 35-month high, yet appears set to drop in December, according to the European Commission’s “flash” reading.

The full reading for the month will be published on 6 January.

The drop was the first since May, when problems in the single currency’s peripheral states previously reached a peak.

“Consumer spending has been a weak link in the Eurozone’s economic recovery,” said Howard Archer of IHS Global Insight. “Yet retail sales volumes rose by 0.5 per cent in October, which was the best performance since May -- so this relapse in consumer confidence is disappointing.”

Meanwhile, the Eurozone’s trade deficit increased considerably beyond the expectations of analysts in October.

The deficit of €9.8bn (£8.3bn) was up from €9.7bn (£8.2bn) in September.

Deficits in current transfers, income, and goods were only partly offset by a surplus in services.
In Germany, producers prices rose slightly more than expected, up 0.2 per cent in November compared to the previous month – and 4.4 per cent higher than last year.
Food inflation led the way, increasing by one per cent on October.

“Pipeline pressures in the food chain keep building up,” said Fabio Fois of Barclays Capital Research.