Eurozone May Consumer Confidence Drops Sharply

(RTTNews) - The consumer confidence index for the euro area stood at minus 17.5 in May, down from minus 15 in the previous month, a flash estimate from the European Commission showed on Thursday. The latest reading was the lowest since October last year. Economists expected a reading of minus 16.

Meanwhile, the consumer confidence index for the whole of the European Union, decreased to minus 14.7 in May from minus 12.3 in the previous month.

"The sovereign debt problems in the Eurozone have not left consumer confidence unscathed," ING Bank NV economist Martin van Vliet said. "We suspect that the fall in overall consumer sentiment was led by declines in the Southern periphery, where consumers have been confronted with draconian fiscal tightening measures."

The sharp decline in May consumer confidence may well put further downward pressure on the euro, as it pushes the much-needed recovery in consumer spending further into the future, the economist said.

As more and more governments announce tax hikes and spending cuts, sentiment might well fall further, Jennifer McKeown at Capital Economics said. With wages still responding negatively to earlier increases in unemployment, the economist sees little hope of the consumer revival that would be needed to generate a meaningful economic recovery.

The final data for the consumer confidence survey is due on May 31.