Intermoney: The confidence indicators were published yesterday in the Eurozone, both the one referring to consumers and the one referring to businessmen. Regarding the former, in the Euro zone as a whole we saw a noticeable change for the worse, with consumer confidence as compiled by the EC falling to -13.7 pts (vs. -12.5 est.). Concerning the business climate, in this case we had the national reading in France, which deteriorated again, down to 96 pts. The curious thing was that business confidence rebounded only in industry, and this being the first reading after Trump’s election, we expected a worse performance from manufacturers due to tariff policies. However, it was the rest of the sectors in which we observed a drop in business confidence.
In services, there was a worsening outlook for activity and demand, as well as in wholesale and retail trade, which indicated that order intentions and employment levels continue to decline. We did expect sentiment in construction to continue to be dented by the still restraining effects of high financing costs. In fact, underlying GDP growth in 3Q24 was weaker than GDP actually showed, given the influence of the Olympics.
Given domestic political uncertainties and the weaker international economic backdrop, business investment is likely to weaken further while domestic demand may see its recovery slow. As recently as this week, Marine Le Pen threatened to block the budget and call for a vote of no confidence, and with such a divided Assembly, passing a budget that addresses France’s necessary spending reforms is an almost impossible task.
