February 27, 2018 / 11:22 AM / 23 days ago

Euro zone sentiment slips in Feb as only services mood improves

BRUSSELS (Reuters) - Euro zone sentiment fell as expected for the second month in a row in February from a multi-year high as confidence sapped from every sector except services, the European Commission said on Tuesday.

FILE PHOTO - People carry their shopping bags in downtown Hamburg, Germany, January 25, 2018. REUTERS/Fabian Bimmer

European Commission survey data showed economic sentiment in the euro zone eased in February to 114.1 points from a revised 114.9 in January, having hit a 17-year high of 115.3 in December.

The average expectation in a Reuters poll of 33 economists was a figure of 114.0.

Separately, the Commission’s business climate indicator, which points to the phase of the business cycle, also eased to 1.48 in February from 1.56 in January.

Sentiment in euro zone industry fell to 8.0 from 9.0 in January, and plunged to 0.1 from 1.4 among consumers. Retail trade, construction and financial services were all less upbeat.

The services sector, which represents more than two thirds of euro zone GDP, however, was the only one where optimism grew - to 17.5 from 16.8 in January.

“The drops in consumer and manufacturing future expectations suggest sensitivity to the recent market turmoil has played a role in the decline in the index,” said ING senior euro zone economist Bert Colijn.

“As markets have been recovering somewhat, a bounce back in March seems possible. Just as one swallow doesn’t make a summer, one poor month of surveys doesn’t make a slowdown,” he said.

Colijn said there were significant backlogs of work, production was at high levels and business hiring improving, meaning the euro zone economy was set for continued strength in the foreseeable future.

Consumer inflation expectations twelve months ahead also eased to 18.0 from 19.6 in January, but remained close to the long-term average of 18.6, the Commission survey showed.

“Alongside German states’ inflation data also released this morning, which point to a slightly sharper fall in German HICP inflation in February than expected, this suggests that inflation is set to remain subdued,” said Jessica Hinds, European Economist at Capital Economics.

“Accordingly, while we think strong economic growth will encourage the ECB to remove the loosening bias from its forward guidance next month, we expect it to stress that interest rate hikes are a long way off,” she said.

Reporting by Philip Blenkinsop and Jan Strupczewski; editing by Robert-Jan Bartunek

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