Eurozone sentiment falls markedly and German industrial output suffers biggest fall in two years

Economic sentiment in the eurozone decreased “markedly” in December, the European Commission said, and poor German industrial data added to the currency bloc’s woes.

The commission’s economic sentiment indicator fell to 107.3 points in December from 109.5 the previous month, dropping in all twelve months of 2018.

German industrial output also suffered its biggest decline in more than two years in November, fuelling fears the country may have entered a technical recession in the fourth quarter of 2018.

Production was down 1.9 per cent compared with October, falling for the third consecutive month.

“This is a poor update from the largest economy in Europe, and it doesn’t bode well for the region,” CMC Markets analyst David Madden said.

The German economy shrank in the third quarter and a fourth quarter drop would see it enter a technical recession.

While European stocks made small gains this morning, the euro fell sharply against the dollar before recovering.

“Eurozone GDP estimates keep getting revised down, and there seems no let-up in the general malaise consuming the currency bloc,” IG analyst Chris Beauchamp said.

“The current bounce in equities still looks like one of those vicious bear market rallies, and the worsening eurozone economic outlook, combined with lack of easing from the European Central Bank, means that stocks in Europe are still facing a very tough future that suggests further falls are likely.”

Consumer confidence in the 19-country bloc also fell sharply in December, dropping 2.3 points to -6.2, although yesterday’s data showed retail sales kept growing strongly in November.

The commission’s business climate indicator also slid 0.22 points, warning that managers’ assessments of past and expected production and order books deteriorated markedly.