Euro zone sentiment sharply down

Euro zone economic sentiment defied expectations of stabilisation and again fell sharply in September, underlining the economic gloom brought on by the sovereign debt crisis as the euro zone sinks into a recession.

The European Commission's monthly economic sentiment survey showed the index for the 17 countries sharing the euro falling to 85 points this month from 86.1 in August. Economists polled by Reuters had expected a flat reading today.

The data also showed that inflation expectations rose among producers, the services sector and households alike, complicating any possible decision by the European Central Bank to cut interest rates and help the economy.

Separately the European Commission's business climate indicator for the euro area, which points to the phase of the economic cycle, fell to -1.34 points in September from -1.18 in August, against market expectations of -1.19 points.

The euro zone economy stagnated in the first three months of the year quarter-on-quarter and contracted 0.2 percent in the April-June period.

Economists expect another contraction in the third quarter, which would take the euro zone into recession.

The Commission survey showed euro zone sentiment in industry declined to -16.1 in September from -15.4 in August, and to -12 in the services sector from -10.8.

Sentiment among consumers fell to -25.9 from -24.6 and to -18.6 from -17.2 in retail trade. Construction was the only sector where confidence improved marginally, to -31.9 from -33.1 in August.

Reuters