Euro zone sentiment, inflation expectations dip in April

BRUSSELS (Reuters) – Euro zone economic sentiment deteriorated slightly in April defying market expectations of further improvement, while inflation expectations among consumer and companies alike continued to fall, European Commission data showed on Tuesday.

The monthly Commission survey showed that economic sentiment in the 18 countries sharing the euro eased to 102.0 in April from 102.5 in March, mainly because of a dip in confidence in the construction sector and in services.

Economists polled by Reuters had expected an improvement to 103.0 in April.

“The slight decrease in sentiment was mainly due to a worsening of confidence in services and construction, which are the two sectors where confidence still scores below its long-term average,” the Commission said.

“In industry and retail trade, sentiment remained virtually unchanged compared to March. Confidence among consumers improved,” it said.

Consumer inflation expectations 12 months ahead fell to 7.5 points in April from 10.8 in March, continuing a steady decline since last October.

Selling price expectations among manufacturers fell to -1.4 in April from -0.7 in March and -0.2 in February.

Inflation in the euro zone has been stuck in what the European Central Bank calls the “danger zone” below 1 percent year-on-year since October, mainly because of falling energy prices and food and the appreciation of the euro.

This creates a risk of deflation, and the ECB has said that if the euro exchange rate appreciated further, it would respond with monetary policy so as to keep the overall policy mix unchanged.

Separately, the Commission’s business climate indicator, which points to the phase of the business cycle, fell to 0.27 in April from 0.40 in March.

“Managers’ evaluation of the past and expected production, as well as of the current level of export order books worsened, while their assessment of overall order books improved and their appraisal of the stocks of finished products remained broadly unchanged,” the Commission said.

(Reporting By Jan Strupczewski; editing by John O’Donnell)

Euro zone sentiment, inflation expectations dip in April