After a fleeting spell of stability, sentiment across the European economy weakened again in March. Fading optimism in services and retail sectors pushed confidence deeper below historical levels, casting doubt over the bloc’s ability to shake off stagnation anytime soon.
In a report shared Friday by the European Commission, the Economic Sentiment Indicator for March dropped 0.9 points in the European Union to 96.0, and 1.1 points in the euro area to 95.2—well below the long-term average of 100. The latter missed economic expectations of a rebound to 97.
This also marks the second consecutive monthly decline and underscores mounting concerns over Europe's near-term economic outlook.
The drop in sentiment was primarily fuelled by declines in confidence across services, retail trade and households.
Services—the backbone of the eurozone economy—saw confidence tumble from 5.1 to 2.4 points, the sharpest monthly drop in four months. The reading missed expectations of a rise to 6.7.
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Managers reported a deterioration in their business situation, past demand and future demand expectations, suggesting cracks are forming in one of the most resilient parts of the economy.
Retail confidence fell 1.8 points, dragged down by pessimism in expectations, current conditions and stock levels.
While retail had remained relatively stable in previous months, March’s sharp drop reflects growing caution among both businesses and consumers.
Consumer sentiment, meanwhile, resumed its downward trend after a short-lived pause.
The index fell by 0.9 to -14.5, matching estimates, as households across the bloc grew more pessimistic about their country’s economic outlook and their own financial prospects.
However, there was a modest uptick in intentions to make major purchases, suggesting some resilience in spending behaviour, likely linked to easing inflation and higher wage expectations.
Which countries are losing confidence?
Cyprus recorded the highest Economic Sentiment Index at 106.3, while Germany witnessed the lowest at 89.4.
The variations compared to February were not uniform across the bloc. France and Italy experienced the steepest declines, with sentiment down 2.1 and 2.0 points respectively.
In contrast, Spain saw a notable improvement, gaining 1.1 points, while Germany and Poland posted marginal gains of 0.3 and 0.2. Sentiment in the Netherlands remained unchanged.
Within the broader European Union, Czechia showed the strongest monthly gain in sentiment, with its ESI rising from 98.7 to 101.5, a 2.8-point jump.