Ifo Euro-Region Economic Climate Deteriorates in Fourth Quarter

Confidence in the euro-area economy plunged in the fourth quarter to the lowest in more than three years as governments struggle to rein in deficits and weak demand fuels unemployment, Germany’s Ifo institute said.

An index measuring economic sentiment in the 17-nation currency bloc fell to 81.7 from 88.9 in the three months through September, Munich-based Ifo said in an e-mailed statement today, citing its quarterly World Economic Survey. That’s the lowest since the third quarter of 2009. A measure of current conditions fell to 97.9 from 103.5, while a gauge of expectations dropped to 72.1 from 80.3.

“In most euro-member countries, expectations for the next six months have deteriorated,” Ifo said. “An economic recovery isn’t yet in sight.”

While Germany’s economic conditions worsened somewhat in the fourth quarter, they can still be considered satisfactory, Ifo said. Sentiment in Greece, Italy, Portugal, Spain and Ireland remain at levels suggesting recession.

Euro-area inflation expectations for 2012 rose to 2.4 percent from 2.2 percent, Ifo said. Survey respondents predict short-term interest rates and the exchange rate versus the U.S. dollar will remain broadly unchanged.

The survey is based on responses from 270 economic experts and conducted in cooperation with the International Chamber of Commerce in Paris.

To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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