The Economic Sentiment Indicator for the 17-country euro zone slipped 1.5 percentage points to 88.6. Economists polled by Reuters had expected a decline to 89.3.

The disappointing figures highlight the euro zone’s difficult road out of recession and the souring of the mood among companies and consumers since March, after an optimistic start to the year.

What is likely to be of most concern is the fact that pessimism has set in even in Germany, which has Europe’s biggest economy, where economic sentiment worsened by 2.3 points. Morale also fell in France and Italy, meaning that the euro zone’s three largest economies are all witnessing a marked decline in the confidence that is crucial to get output growing again.

Across the euro zone, sectors ranging from industry to retail trade showed falling confidence. Sentiment in services fell 4.1 percentage points.

The commission’s measure of the euro zone’s business cycle reflected the malaise, decreasing 18-hundredths of a point to minus 0.93, lower than the minus 0.89 level expected by economists.

Many now expect the European Central Bank to cut interest rates to lower the cost of borrowing and help improve morale. The benchmark European rate, the refi rate, stands at 0.75 percent, a record low; many economists expect a cut to 0.5 percent.

Germany’s economic resilience and changes in Southern Europe had sown hope early in the year that the euro zone could pull out of recession before the end of the year, but the messy bailout of Cyprus and the inconclusive Italian elections in February have weighed on confidence. France’s weak economy and public accounts are also a concern.

Consumer confidence in the euro zone increased 1.2 points, however, and in Spain, sentiment improved by almost 1 point, in a sign that changes may be helping business despite record unemployment.

Article source: http://www.nytimes.com/2013/04/30/business/global/30iht-eurozone30.html?partner=rss&emc=rss