Euro zone economic sentiment improved marginally in March as the mood in the construction and retail sectors improved, but business and consumer confidence stagnated, the European Commission said today.
The latest sign that confidence in households and firms, vital to spurring economic recovery, may be sputtering came even before the Madrid bombings of March 11th, before which most of the survey responses had been submitted.
A separate Commission report showed an indicator which tracks the euro zone business climate fell for the second month in a row in March, declining to a five-month low of minus 0.10 from 0.01 in February, as production trends worsened.
Stalling business and consumer confidence comes at a time when the inflation rate in the 12 nation region is running at 1.6 percent, its lowest rate since November 1999, and below the 2.0 percent rate around which the European Central Bank aims to keep inflation.
The latest reports will keep market speculation alive the ECB could cut interest rates possibly even at its next meeting tomorrow , particularly as sounding for the sentiment surveys were taken before the March 11th bombings in Madrid.
"The momentum of the recovery is starting to wane and this will increase pressure on the ECB to ease," said Mr Ken Wattret, chief euro zone market economist at BNP Paribas in London.
"This week is probably a bit early for them to act, bit a 50 basis point cut in June or maybe even May is more likely."
The overall euro zone economic sentiment indicator rose to 96.0 from a revised 95.9 in February. February's figure had previously been reported as 96.0.
The March reading was nevertheless in line with economists' expectations, as the business and consumer confidence components held steady at minus seven and minus 14 respectively.
Consensus forecasts had been expecting consumer sentiment to remain unchanged but had expected business sentiment to come in at minus six, the same as originally reported for February.