* Euro zone index at 93.7 points against 94.8 in October
* Mood sours in all sectors except for construction,
* Business climate indicator falls for ninth consecutive
By Robin Emmott
BRUSSELS, Nov 29 Worries about the euro
zone's debt crisis worsened in November and dragged the European
Commission's economic and consumer sentiment index to a two-year
low, heightening the risks of a recession in Europe.
Business managers and consumers turned more pessimistic
across almost all sectors of the euro zone's economy and the
Commission's monthly economic sentiment index slipped to 93.7,
its lowest since late 2009, and down from 94.8 in October.
Economists polled by Reuters had expected a figure of 94.0.
Adding to the depth of concern about the debt crisis and a
slowing economy shown by last week's purchasing managers'
surveys, the Commission's business climate indicator fell for a
The index slid to -0.44 points from -0.19 and notched up a
third month below zero. November's reading was the lowest since
"The euro zone's economy seems to be heading into a fairly
deep recession," said Jennifer McKeown, an economist at Capital
Economics in London. "Public finance problems, the lack of
reform and in some cases the risk of default are all issues and
this trend in weakening confidence is likely to become worse."
European leaders have so far been unable to rally round a
convincing strategy to solve the two-year crisis and bond yields
are at or close to unaffordable levels in Spain and Italy.
Neither new technocratic governments in Athens and Rome, nor
plans to amplify the power of the bloc's rescue fund, have been
able to calm investor concerns about a Greek default or a
break-up of the 17-nation currency area.
Those concerns are feeding back to company boardrooms,
factory floors and households. Combined with austerity
programmes and layoffs across the euro zone, businesses and
individual consumers are simply not spending and investing.
The European Central Bank has warned of a mild recession and
most economists expect the bloc's economy to contract in the
Many see the ECB cutting interest rates again in December,
having cut them to 1.25 percent from 1.50 percent earlier this
month -- even though the Commission's survey showed a slight
increase in consumer inflation expectations in November.
"The very serious possibility of a euro zone contraction in
the fourth quarter, coupled with recent overall signs that
underlying inflationary pressures are easing, provides a
compelling case for the ECB to cut interest rates," said Howard
Archer, an economist at IHS Global Insight.
CONSUMER CONFIDENCE FALLS AGAIN
According to the Commission's surveys, confidence ebbed away
across all most all sectors of the economy except for
construction and financial services.
Sentiment deteriorated in industry -- the motor of Europe's
recovery from the 2009 recession -- falling by 0.8 points from
October. "Euro-area managers expect to decrease their investment
volumes by 2 percent in 2012 compared with 2011," the Commission
said in a statement.
China's easing economic growth and falling demand for
European goods seemed evident, as factories reported a further
weakening in their order books, especially from abroad.
In a bad sign for unemployment in the euro zone, which is
above 10 percent, companies in services were more pessimistic
about recent orders and future business coming their way.
The service sector index fell 1.8 points in November, while
in retail, sentiment dropped 1.3 points. In construction there
was some optimism in November, and sentiment nudged up 0.3
points, the Commission said.
Consumer confidence fell for a fifth month running to hit a
27-month low in November, down 0.5 points to -20.4.
However, in the financial services sector, confidence
increased, rising 4.9 percent on the month, which the Commission
attributed to managers' improved assessment of recent
developments in the business situation and demand.