Belgium's leading indicator falls to 20-month low

BRUSSELS: Belgian business confidence, a bellwether for the euro zone, plunged to a 20-month low in August after a very sharp decline of sentiment among manufacturers, the central bank said on Wednesday.

The business confidence index, often referred to as the leading indicator, dropped for a fifth consecutive month to -7.8 points from -2.5 in July, the sharpest decline since December 2008.

Germany's influential Ifo business climate index earlier on Wednesday dropped by its greatest amount since the aftermath of the Lehman Brothers collapse in 2008, reaching a 14-month low.

Belgium's consumer confidence, released last week, dropped to a 15-month low in August because households' views of the economy and the labour market sharply deteriorated.

However, Belgium's economy grew by 0.7 percent in the second quarter from the first, among the highest rates in the euro zone, which as a whole expanded by only 0.2 percent.

Economists said the deterioration in business sentiment was more due to expectations than any notable slowdown now.

"If you look at the questions about current conditions, it's not that bad. The indicator shows a lack of confidence for the future, but up to August there seems to be no clear decrease in activity," said Philippe Ledent, economist at ING Belgium.

He added that the fact that the trade component barely moved showed that the purchasing power of consumers had not taken much of a hit.

Copyright Reuters, 2011