Belgian Business Confidence Falls to Lowest in 20 Months

Belgian business confidence sank in August to the lowest level since December 2009, driven down by declining optimism in the business-services sector.

The confidence index for Belgium fell to minus 7.8 from minus 2.5 in July, the National Bank of Belgium in Brussels said today in an e-mailed statement. Economists expected a drop to minus 3.5, the median of 14 forecasts compiled by Bloomberg.

Belgium’s economic growth slowed to 0.7 percent in the second quarter from 1 percent in the previous period as Europe’s recovery lost momentum amid government budget cuts and concerns that the sovereign-debt crisis will spread. The slower growth may complicate efforts to narrow the budget deficit as a political stalemate has left Belgium without a full-time government for 14 months.

The central bank’s gauge of confidence in the business-services sector plummeted to 2.7 in August from 13.9 a month earlier, today’s report showed. Sentiment in manufacturing fell to minus 12 from minus 6.2, while the trade figure rose to 5 from 1.2.

The National Bank of Belgium reported last week that consumer confidence declined in August to the lowest in 14 months as households pared their expectations for economic growth and became less optimistic about their capacity to save.

Borrowing Costs

Europe’s economy is struggling to gather strength as governments from Italy to Spain step up budget cuts to fight the debt crisis. Pledges of 365 billion euros ($525 billion) in official loans to Greece, Portugal and Ireland, and 110.5 billion euros of bond purchases by the European Central Bank failed to fix the finances of those countries or prevent speculative attacks on Spain and Italy.

Belgian borrowing costs soared during those attacks. The premium investors demand to hold Belgian 10-year debt over German bonds of similar maturity peaked Aug. 4 at 218 basis points. The spread has since narrowed to 174 basis points.

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