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Euro area economic sentiment declines for 3rd straight month


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Euro area economic sentiment declines for 3rd straight month

Economic sentiment in the eurozone declined for the third straight month in March, hitting its lowest level since September 2017, prompting analysts to say economic growth might be slowing in the single currency area as global trade tensions sap confidence.

The sentiment index decreased to 112.6, from 114.2 in February, the European Commission said.

The greater-than-expected decrease in euro area's economic sentiment "echoes the message from the other surveys that eurozone GDP growth may have peaked," said Jessica Hinds, European economist at Capital Economics.

Retail trade confidence fell by 2.9 points from the prior month and industry confidence retreated by 1.6 points. Services confidence dropped by 1.3 points from the previous month, although consumer confidence remained stable, reflecting broadly stable assessments of households' future financial situation.

"While the economy continues to perform strongly, some clouds have re-emerged on the horizon. Trade war concerns take center stage and are adding uncertainty to the outlook for businesses and impacting the view on the general economic situation for consumers," ING analysts said in a research note, adding that the ECB was likely to continue to talk dovishly as the September cut-off for quantitative easing approaches.

"Some moderation of growth seems to be underway," the ING analysts said.

The euro fell 0.3% to $1.2410 by 6:50 a.m. ET.

Construction confidence rose by 0.9 point, but employment plans worsened in retail trade and industry.

"With the pace of GDP growth set to soften and inflationary pressures still muted, we expect the ECB to tread very carefully and to continue to stress that interest rate hikes remain a long way off," Hinds said.

According to a separate statistical release, the business climate indicator for the euro area declined to 1.34 in March from 1.48 the previous month as managers' assessments of past and future production, stocks of finished products and overall order books worsened significantly.