Euro zone economic sentiment set record lows in December amid rising unemployment, data showed, and inflation expectations tumbled, further strengthening the case for a deep European Central Bank rate cut next week.
The European Commission said economic sentiment in the 15 countries using the euro in December plunged to 67.1 points - the lowest since records began in 1990 - from 74.9 in November.
Separately, the Commission's business climate index, which points to the phase of the business cycle, tumbled to -3.17 points - the lowest since records started in 1985 - from -2.10 in November.
"The continued steep decline of the indicator signals a deteriorating trend in year-on-year industrial production growth, which is likely to turn out clearly negative in the fourth quarter," the Commission said in a statement.
Sentiment indicators are plunging as the euro zone economy sinks deeper into its first recession in the wake of the credit crunch, which slashed financing to companies and households, curbing demand and causing corporate belt-tightening.
The European Union statistics office said unemployment in the euro zone rose to 7.8 per cent in November from 7.7 in October and confirmed third-quarter gross domestic product shrank 0.2 per cent quarter-on-quarter, the same as in April-June.
Unemployment expectations among households surged to 55 points from 44 in November, coming close to an all-time high of 60 set in 1993.
The grim data is likely to reinforce expectations of a deep ECB interest rate cut on January 15th, especially as inflation expectations among households tumbled to 7 points from 11 in November and among firms to -7 from 0.
The bank wants to keep inflation just below 2 per cent but some members of its rate-setting council expressed concern that price growth could be slowing too much after inflation fell to 1.6 per cent in December from 2.1 per cent in November.
Reuters