http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aGHBP7wgtmtE
Jan. 29 (Bloomberg) -- European confidence in the economic outlook fell to the lowest on record in January as the region faces its worst recession since World War II, adding to arguments for the European Central Bank to cut interest rates further. An index of executive and consumer sentiment dropped to 68.9 from a revised 70.4 in December, the European Commission in Brussels said today. That is the lowest since the index was first published in 1985. Euro-area capacity utilization fell to 75.2 percent, the lowest since 1990, in the current quarter, the report showed. A combined 2.25 percentage-point rate cut from the central bank and hundreds of billions of euros in stimulus measures have failed to reverse a slump in confidence, and ECB President Jean- Claude Trichet has signaled another reduction is likely in March. With the International Monetary Fund forecasting the global economy will almost stagnate in 2009, this week alone SAP AG, Boeing Co., Caterpillar Inc. and STMicroelectronics NV announced job cuts. “We’re looking at a very sharp deterioration in orders and output which is passing through into the labor market,” said Ken Wattret, senior economist at BNP Paribas in London. “The adjustment in the euro- area labor market is only just beginning.” A measure of manufacturers’ confidence fell to a record low in January, the commission report showed, while consumer sentiment dropped for a fourth month. Manufacturers’ employment expectations declined for a 10th straight month. Job Cuts Germany’s SAP, the world’s biggest maker of business- management software, this week said it will slash more than 3,000 jobs, or 6.2 percent of its workforce, this year as the economic slump hurts orders. STMicroelectronics, Europe’s largest maker of semiconductors, is cutting about 4,500 positions, or 10 percent of the workforce, as demand for mobile-phone and automotive chips weakens. Economists forecast the overall confidence indicator would drop to 65.4 this month, according to the median estimate of 27 economists in a Bloomberg News survey. The December confidence figure was revised higher from 67.1 reported earlier. The IMF yesterday cut its forecast for the euro-area economy to predict a contraction of 2 percent this year. It previously projected the economy would shrink 0.5 percent in 2009, similar to the ECB’s December projection. “This year is in the negative territory and even more in negative territory than our last projections,” the ECB’s Trichet said yesterday in an interview with Bloomberg Television in Davos, Switzerland, where he is attending the annual meeting of the World Economic Forum. The ECB will publish updated projections in March. Inflation Risks Amid global concerns about deflation after a 70 percent drop in the cost of oil from a July peak, consumer-price expectations fell further in January, today’s survey showed. Manufacturers’ selling-price expectations dropped for a sixth month. “The ECB is telling us inflation risks are balanced, I don’t think they are, I think inflation risks are to the downside,” Wattret said. “The ECB should carry on cutting rates and should get on with it as soon as possible.” ECB council member Vitor Constancio said on Jan. 28 that the central bank should do “everything” to prevent a sustained decline in prices, following comments from Trichet on Jan. 15 that inflation could reach “very low levels” in the middle of this year. Euro-area inflation probably slowed to 1.4 percent in January from 1.6 percent in December, according to a Bloomberg survey of economists. That report is due tomorrow. Investors are betting the ECB will cut rates by another 50 basis points at its next meeting on Feb. 5 and that rates will fall to close to 1 percent by March, Eonia forward contracts indicate. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/world-thread?hl=en -~----------~----~----~----~------~----~------~--~---
