European consumer confidence dropped more than economists forecast in December to the lowest in more than two years, adding to signs of a deepening economic slump in the 17-nation euro region.
An index of household sentiment in the single-currency area fell to minus 21.2 from minus 20.4 in November, the Brussels-based European Commission said in an initial estimate today. That’s the lowest since August 2009. Economists had forecast a drop to minus 21, the median of 23 estimates in a Bloomberg survey showed.
Europe’s economy is edging toward a recession as governments toughen budget cuts to contain the fiscal crisis, undermining consumer demand. Unemployment increased in October to the highest in more than a decade and L’Oreal SA, the world’s largest cosmetics maker, said on Nov. 7 that consumer confidence is “weak and markets are proving difficult.”
“The debt crisis will determine the development of consumer spending well into 2012,” said Jens Kramer, an economist at NordLB in Hanover, Germany. “People are worried and holding back spending as a result. The euro-region economy will slip into a recession in the current quarter.”
The euro-region economy may expand 0.3 percent in 2012 instead of a previously forecast 1.3 percent, the European Central Bank said on Dec. 8. Consumer spending will increase 0.1 percent next year, down from a previous estimate of 0.8 percent, before rising 0.9 percent in 2013, it said.
Austerity measures in countries from Spain to Greece and Italy have left households reluctant to spend just as companies step up job cuts. Munich-based Siemens AG, Europe’s biggest engineering company, plans to eliminate as many as 1,600 positions at its health-care division.
“We are tackling the last quarter with confidence” even though the situation remains difficult in southern Europe, L’Oreal Chief Executive Officer Jean-Paul Agon said on Nov. 7.
The commission is scheduled to publish its monthly report on euro-area economic confidence, which includes the consumer-confidence gauge, on Jan. 6.