University of Michigan consumer confidence dropped from 61.2 in January to 56.2 in February, according to the first estimate. This was disappointing as the consensus expected only a modest decline (to 60.2) and in previous months some signs of stabilization emerged. Looking at the details, the economic outlook deteriorated significantly (49.1 from 57.8), while the economic conditions sub-index showed a marginal improvement (67.1 from 66.5). The worsening economic outlook might be due to the increasing number of job losses.
EMU: fourth quarter GDP contracts by 1.5% Q/Q
In the fourth quarter of 2008, the euro zone economy showed its sharpest contraction in its 13-year history. GDP fell by 1.5% Q/Q, while the consensus was looking for an outcome of -1.3% Q/Q. On a yearly basis, GDP contracted by 1.2% Y/Y. Part of the sharper than expected contraction was due to the very weak performance of industrial stronghold and export champion Germany (-2.1% Q/Q). These very weak GDP figures increase the pressure on the ECB to cut rates further in the coming months, starting with a 50 basis points rate cut in March.
