The European Commission's monthly Business and Consumer survey for April echoed the message from some other recent surveys that the crisis in Greece might be starting to constrain the euro-zone recovery. The slight fall in the Economic Sentiment Indicator (ESI) from March's 103.9 to 103.7 was smaller than we had feared, but still brought the upward trend of the previous four months to a halt. (The consensus forecast was for an unchanged reading.)
In the breakdown by sector, we already knew that consumer confidence had declined for the first time since November. This was accompanied by falls in the industrial and construction indices, though services saw a further improvement. By country, both Germany and France saw declines in overall economic sentiment, while Spain and Portugal saw rises and the Italian index held steady. Unsurprisingly, the Greek index slumped, warning of a renewed deep recession.
At these levels, the overall euro-zone index remains consistent on past form with annual GDP growth in the currency union of 1% to 1.5%, an improvement on the rates seen last year but hardly spectacular. Clearly, the ESI might resume its previous upward trend - signalling stronger growth ahead - if the Greek crisis is soon resolved. But for now, April's survey is a reminder to forecasters and policymakers alike not to take a further strengthening of the euro-zone's fledgling economic recovery for granted.
