European Central Bank President Mario Draghi's new campaign to save the euro has had little or no immediate impact on the region's shrinking economy, figures published Thursday showed.
The European Commission said confidence among euro-zone consumers and businesses fell for a sixth straight month in September to its lowest level in nearly three years, while the European Central Bank's monthly report on credit developments said lending to the private sector stayed weak and interbank markets remained largely blocked in August, showing no immediate response either to July's cut in official interest rates, or to Mr. Draghi's initiative.
The data painted an overwhelmingly negative picture even in the "core" countries that had largely withstood the effects of the crisis until recently.
Adding to the gloomy picture was a sixth successive rise in unemployment in September in Germany, where a seasonally adjusted 9,000 joined the jobless rolls.
The weakening of confidence in the currency area's core suggests that those economies not yet in contraction will struggle to avoid shrinking in coming months, in turn limiting their ability to help southern European nations already in recession.
The euro-zone economy shrank in the second quarter and Thursday's release will add to expectations that it will continue doing so between July and September.
The worsening outlook led Mr. Draghi and the ECB's governing council to hammer out a detailed plan by early September to support growth and avert deflation in the region's problem countries by buying the bonds of governments that submit to an economic reform program under European Union supervision.
The European Commission said its monthly economic sentiment indicator fell to 85.0 in September from 86.1 in August, adding that among larger nations, the gauges for France, the Netherlands and Germany suffered the largest falls.
The indicator for Italy was marginally lower than in August, and the measure for Spain rose significantly, suggesting the ECB's pledge boosted sentiment in those nations most in need of its help.
"The country breakdown clearly shows that the economic weakness in the periphery is spreading to the core economies," said Martin van Vliet, an economist at ING Bank.
"Today's figures demonstrate that the sustained fiscal austerity and continued 'muddling through' approach to the crisis continue to take their toll on economic confidence across the region."
Across the euro zone, there was a surprise drop in industrial confidence, with the commission's headline measure falling to -16.1 from -15.4 as new orders, in particular for exports, continued to slide.
Economists surveyed by Dow Jones Newswires last week expected the industrial measure to rise to -15.0. Among the components of the economic sentiment indicator, consumer confidence weakened as expectations about the future financial position of households deteriorated significantly.
Confidence among retailers and service providers declined, while construction companies became less downbeat As part of the survey, the Commission asks businesses about their hiring intentions in the months ahead.
Manufacturers, service providers and retailers all said they would cut jobs at a faster pace, indicating that Germany won't be alone in seeing a rise in the number of people without jobs.
The scarcity of credit is one factor damping both business and consumer confidence across the currency area, as banks hit by losses on property loans and on their government bondholdings have cut back on new lending.
Savers are also continuing to withdraw their money from banks in some stressed countries, although at a slower rate than in recent months, the ECB's data showed.
According to the ECB, banks cut lending to businesses by €10 billion ($12.8 billion) in August, although they increased their lending to households by €7 billion.
In unadjusted terms, lending fell in virtually every country in the region, including drops of 0.1% in Germany and 0.5% in France.
Overall private sector credit was down 0.6% from a year ago, while growth in the broad M3 monetary aggregate slowed to 2.9% on the year, undershooting expectations and well below the 4.5% level the ECB considers consistent with stable prices.
Analysts said the figures also showed the limitations of extraordinary operations by the ECB around the turn of the year, at which banks borrowed over €1 trillion for up to three years.
"It is clear that this has not fed through to boost private-sector lending," Howard Archer, an analyst with IHS Global Insight, said in a research note.
"The initial evidence also suggests that the ECB's decision to cut its deposit rate to zero from 0.25% in early July has done little to encourage banks to lend more to the private sector."
Banks had initially used much of the money from the long-term refinancing operations, or LTROs, to buy government bonds, but the ECB's data showed that pattern reversing again in August.
Spanish banks unloaded a net €2.9 billion in a third successive month of net sales, while Italian banks turned net sellers for the first time this year, unloading €6.2 billion.
Mr. Archer said the figures argue for a further cut in the ECB's key refinancing rate to 0.50% from its current record low of 0.75%.
The most recent comments by governing council members Benoit Coeure and Ewald Nowotny have suggested the ECB isn't preparing any such step at its meeting next week.
wsj.com
The European Commission said confidence among euro-zone consumers and businesses fell for a sixth straight month in September to its lowest level in nearly three years, while the European Central Bank's monthly report on credit developments said lending to the private sector stayed weak and interbank markets remained largely blocked in August, showing no immediate response either to July's cut in official interest rates, or to Mr. Draghi's initiative.
The data painted an overwhelmingly negative picture even in the "core" countries that had largely withstood the effects of the crisis until recently.
Adding to the gloomy picture was a sixth successive rise in unemployment in September in Germany, where a seasonally adjusted 9,000 joined the jobless rolls.
The weakening of confidence in the currency area's core suggests that those economies not yet in contraction will struggle to avoid shrinking in coming months, in turn limiting their ability to help southern European nations already in recession.
The euro-zone economy shrank in the second quarter and Thursday's release will add to expectations that it will continue doing so between July and September.
The worsening outlook led Mr. Draghi and the ECB's governing council to hammer out a detailed plan by early September to support growth and avert deflation in the region's problem countries by buying the bonds of governments that submit to an economic reform program under European Union supervision.
The European Commission said its monthly economic sentiment indicator fell to 85.0 in September from 86.1 in August, adding that among larger nations, the gauges for France, the Netherlands and Germany suffered the largest falls.
The indicator for Italy was marginally lower than in August, and the measure for Spain rose significantly, suggesting the ECB's pledge boosted sentiment in those nations most in need of its help.
"The country breakdown clearly shows that the economic weakness in the periphery is spreading to the core economies," said Martin van Vliet, an economist at ING Bank.
"Today's figures demonstrate that the sustained fiscal austerity and continued 'muddling through' approach to the crisis continue to take their toll on economic confidence across the region."
Across the euro zone, there was a surprise drop in industrial confidence, with the commission's headline measure falling to -16.1 from -15.4 as new orders, in particular for exports, continued to slide.
Economists surveyed by Dow Jones Newswires last week expected the industrial measure to rise to -15.0. Among the components of the economic sentiment indicator, consumer confidence weakened as expectations about the future financial position of households deteriorated significantly.
Confidence among retailers and service providers declined, while construction companies became less downbeat As part of the survey, the Commission asks businesses about their hiring intentions in the months ahead.
Manufacturers, service providers and retailers all said they would cut jobs at a faster pace, indicating that Germany won't be alone in seeing a rise in the number of people without jobs.
The scarcity of credit is one factor damping both business and consumer confidence across the currency area, as banks hit by losses on property loans and on their government bondholdings have cut back on new lending.
Savers are also continuing to withdraw their money from banks in some stressed countries, although at a slower rate than in recent months, the ECB's data showed.
According to the ECB, banks cut lending to businesses by €10 billion ($12.8 billion) in August, although they increased their lending to households by €7 billion.
In unadjusted terms, lending fell in virtually every country in the region, including drops of 0.1% in Germany and 0.5% in France.
Overall private sector credit was down 0.6% from a year ago, while growth in the broad M3 monetary aggregate slowed to 2.9% on the year, undershooting expectations and well below the 4.5% level the ECB considers consistent with stable prices.
Analysts said the figures also showed the limitations of extraordinary operations by the ECB around the turn of the year, at which banks borrowed over €1 trillion for up to three years.
"It is clear that this has not fed through to boost private-sector lending," Howard Archer, an analyst with IHS Global Insight, said in a research note.
"The initial evidence also suggests that the ECB's decision to cut its deposit rate to zero from 0.25% in early July has done little to encourage banks to lend more to the private sector."
Banks had initially used much of the money from the long-term refinancing operations, or LTROs, to buy government bonds, but the ECB's data showed that pattern reversing again in August.
Spanish banks unloaded a net €2.9 billion in a third successive month of net sales, while Italian banks turned net sellers for the first time this year, unloading €6.2 billion.
Mr. Archer said the figures argue for a further cut in the ECB's key refinancing rate to 0.50% from its current record low of 0.75%.
The most recent comments by governing council members Benoit Coeure and Ewald Nowotny have suggested the ECB isn't preparing any such step at its meeting next week.
wsj.com
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