Europeans Despondent as Lockdowns Spread
23 März 2020 - 05:07PM
Dow Jones News
By Paul Hannon
Europeans became much gloomier about their prospects in early
March as governments across the continent announced a series of
ever more stringent restrictions on movement and social
interaction, suffering the largest loss of confidence in a single
month on record.
The European Commission Monday said its measure of consumer
sentiment in the 19-country eurozone slumped to minus 11.6 from
minus 6.6 in February, the largest one-month fall since the series
began in 1985.
Europeans were gloomier in the 12 months that followed the
collapse of Lehman Brothers in September 2008, the event that
signalled an intensification of a mounting financial crisis.
But at no point did they shift so sharply and abruptly from
hopefulness to gloom in the course of a few weeks, as they did in
early March. The drop in that month takes the measure below its
long-term average of minus 11, signaling a swing to relative
pessimism from optimism.
The Commission's survey excluded the U.K., which left the
European Union in January. However, a separate survey of households
by Ipsos MORI for data firm IHS Markit found British households
also grew more gloomy about their financial outlooks in early
March.
The survey found that workers were less sure of keeping their
jobs than at any time since early 2012, with those employed by
manufacturers and in the entertainment industry most fearful of
becoming unemployed.
That swing to despondency will make the task of keeping the
economy afloat even more challenging for governments and central
banks, since pessimistic consumers tend to cut back on spending.
With consumers already restricted in their purchases thanks to the
lockdowns, cutting back where they still have a choice would worsen
the expected downturn.
Ben Sanders, a 32-year-old who works for a cybersecurity firm in
London, bought three bottles of wine he found for 60% off at a pub
in North London over the weekend. Mr. Sanders said he expects to
buy beer from the pub going forward but doesn't expect to drink as
much at home as he ordinarily would when out with friends.
"I might have a few drinks on a Wednesday and a Saturday but
possibly not quite as much as before," he said.
European governments have steadily tightened restrictions on
movement and gatherings of people over recent weeks, having
initially decided against following the example set by China and
some other Asian countries in later January and February.
Italy ratcheted up its nationwide quarantine Sunday, shutting
down almost all industrial production and offices as it struggles
to contain the world's deadliest coronavirus outbreak.
The German government last week ordered all nonessential
businesses to close to help limit contagion, while large industrial
companies such as car makers Volkswagen AG and BMW AG shut their
factories. On Sunday, it announced a tightening of these measures,
including a ban of public gatherings of more than two people.
Those restrictions will likely push the eurozone economy into
recession, and economists expect to see the largest drop in output
coming in the three months through June.
"The lockdown of large parts of Europe over the past two weeks
has sharply worsened the economic outlook and a recession now
appears inevitable -- the question is how deep and long it will
be," said Reinhard Cluse, an economist at UBS.
March is expected to mark the first month of sharp declines in
activity, with some businesses already announcing layoffs and
reduced hours for their workers. In a report released Monday,
Germany's Ifo think tank estimated that 1.8 million jobs could be
lost over coming months, with a further six million seeing their
hours of work shortened.
The Commission's survey of consumer confidence was largely
complete before the latest round of restrictions were announced
last week, and they could deal a further blow to sentiment.
But the survey also missed the response to a series of measures
designed to pay and persuade businesses to hold onto their workers
over the coming months, even if they see revenues tumble. If those
government initiatives seem likely to succeed, households may
quickly recover their sense of hope.
--Saabira Chaudhuri in London contributed to this article.
Write to Paul Hannon at paul.hannon@wsj.com.
(END) Dow Jones Newswires
March 23, 2020 11:52 ET (15:52 GMT)
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