European Business, Consumer Confidence Falls to Lowest Level Since 2005, Sales Slump

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from Bloomberg:



Europe Business, Consumer Confidence Falls; Retail Sales Slump

By Fergal O'Brien

June 27 (Bloomberg) -- European confidence dropped more than economists forecast this month and retail sales plunged, signaling that economic growth is continuing to cool even as the European Central Bank prepares to lift interest rates to a seven-year high to tackle inflation.

An index measuring sentiment in the euro area fell to 94.9, the lowest since May 2005, from 97.6 the previous month, the European Commission in Brussels said today. Separate reports showed European retail sales plummeted, while inflation accelerated in Germany and Spain.

Stocks fell in Europe today as oil climbed to a record above $140 a barrel and Carrefour SA, Europe's biggest retailer, scaled back its earnings forecast. With soaring food and energy prices boosting inflation, ECB President Jean-Claude Trichet has said the bank may raise the benchmark rate next week by a quarter point to 4.25 percent.

``The economy has hit the wall,'' said Ken Wattret, senior economist at BNP Paribas SA in London. ECB officials ``run the risk of tipping the euro area into a recession'' as the inflation outlook increases the risk that the central bank ``may need to go beyond one rate rise.''

Confidence among the manufacturing, construction and retail industries across the 15 nations that share the euro declined this month, as did consumer sentiment, according to today's commission report.

The Bloomberg retail index, based on a survey of more than 1,000 executives compiled by Markit Economics, fell to 44 this month from 53.1 in May. A reading below 50 indicates contraction. Europe's manufacturing and services industries also contracted this month. ......(more)

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