Euro Area: Economic sentiment dips amid tighter restrictions in January

Euro Area Economic Sentiment January 2021

Euro Area: Economic sentiment dips amid tighter restrictions in January

Sentiment in the Eurozone fell to 91.5 in January from 92.4 in December, amid the tightening of measures to combat the second wave of Covid-19. The index therefore moved further below its long-run average of 100. January saw a considerable deterioration in sentiment in the retail trade sector, amid non-essential retail shutdowns in Germany and the Netherlands. Moreover, confidence in the services and financial services sectors posted slight drops, as did consumer sentiment. On the other hand, sentiment in the industry and construction sectors rose, albeit timidly. Meanwhile, employment expectations turned more negative.

In terms of specific countries, sentiment dropped in France and Germany, although it increased in Italy, the Netherlands and Spain.

Commenting on the release, Bert Colijn, senior Eurozone economist at ING, stated:

“Vaccination hopes will no doubt fuel optimism for the moment, but with new cases continuing to be elevated, new extensions of measures cannot be ruled out. This makes the short-term service sector outlook very uncertain and leads us to believe that GDP will shrink once more in 1Q.”

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