LEAD: EU economic sentiment slumps to two-year low in November

Nov 29, 2011, 19:28 GMT

Berlin - Economic confidence in the 17-member eurozone fell to its lowest level in two years in November, as the currency bloc faced up to a recession triggered by the region's spiralling debt crisis, the European Commission said on Tuesday.

The closely watched monthly economic sentiment indicator (ESI) slumped for the ninth consecutive month to 93.7 in November, against 94.8 in October. Economists had forecast a more modest fall to 94.0 this month.

Releasing the ESI, the commission said the decline followed a 'broad-based deterioration in sentiment' across most business sectors in the currency bloc. The construction sector remained unchanged.

'Managers were more pessimistic about their companies' past production and their export order books,' the commission said.

The further weakening of the ESI adds to signs that the eurozone is heading into an economic contraction, after the European Central Bank (ECB) warned that the currency bloc would slip into a mild recession in the run-up to the end of the year.

The decline in the survey also raises the prospects of the ECB pressing on in coming months with the interest rate-cutting cycle it launched earlier this month.

The ESI indicator now stands at its lowest level since November 2009.

While confidence in the eurozone's industrial sector edged down from minus 6.5 in October to minus 7.3 in November, the ESI gauge measuring the mood in the service sector slipped from zero to minus 1.7. Consumer confidence slipped from 19.9 in October to a 27-month low of 20.4 this month, the commission said.

After weeks of volatile trading on markets, the release of the survey came amid investor hopes that European leaders might be coming to grips with the debt crisis that began two years ago.