European confidence drops to 15-year low

Bloomberg

An index of executive and consumer sentiment dropped to 74.9 from 80 in October, the European Commission in Brussels said yesterday. The November decline was bigger than economists had forecast and takes the index to the lowest since August 1993.

Central-bank and government packages have so far failed to boost sentiment after the euro-area economy slipped into a recession that may last through 2009. The European Union Wednesday announced plans to coordinate 200 billion euros ($258 billion) in measures for the economy, while the European Central Bank has signaled more rate cuts are possible even after lowering its benchmark rate by a full percentage point in a month.

"The euro-zone economy is deteriorating at an alarming rate," said Ken Wattret, an economist at BNP Paribas in London. "The macroeconomic case for a radical cut in ECB rates - of 100 basis points, say - is compelling."

The ECB already has lowered its key rate 100 basis points, to 3.25 percent from 4.25 percent, since early October. ECB President Jean-Claude Trichet Wednesday said he sees "negative growth" in the euro area in 2009, a comment echoed by EU Monetary Affairs Commissioner Joaquin Almunia yesterday. "Downside risks are materializing," Almunia said in Brussels. "The crisis may not end next year."

Bad news from companies
The EU proposal is the latest in a series of measures to counter the impact of a worldwide financial turmoil that has roiled stock markets, shut down access to funding and curbed company investment and hiring. MAN, Europe’s third-largest truckmaker, may shorten the workweek at the commercial-vehicle division next year and impose extra holidays to cope with declining sales.

Ford Motor has already announced plans to cut European production by about 10 percent next year, while Bayerische Motoren Werke and chemicals maker BASF are also scaling back output. A measure of manufacturers’ confidence dropped to minus 25 this month, the lowest in 15 years, from minus 18 in October, according to the commission report. Sentiment in the services and construction industries also declined.

Separately, European retail sales fell the most in at least five years in November, the Bloomberg purchasing managers’ index showed.