The feel-bad factor hit Europe's economy in earnest with confirmation on Friday of a broad slide in consumer and business morale across the eurozone, a rise in French unemployment and downturn beyond the currency bloc too. Central bankers in Scandinavia and Switzerland voiced fears about high oil prices and poor job creation and they promised to hold off on interest rates rises for now, compounding the view that inflation is less of a worry than economic slowdown. Germany and Italy lowered growth forecasts for 2005.
The European Commission said its economic sentiment guage slid more than expected in April, to 96.5 points from 97.5 in March, prolonging an almost uninterrupted slide since November.
The data did nothing to dispel the belief that manufacturing is in or near recession, with a specific reading for industrial sentiment dipping in all countries except Italy and below its long-term average for the first time since the end of 2003.
"The situation is not exactly rosy at the moment," European Commission spokeswoman Amelia Torres said.
Britain's spend happy consumers seemed to be taking fright too, with GfK consultants reporting that morale fell in April.
Reuters published a poll of 20 analysts on Friday that shows they expect the gloom to be confirmed on Monday with the release of the April Purchasing Managers' Index by NTC Research, seen showing the sector is no longer expanding.
FADING AGAIN? National reports were as bad as pan-European ones, casting fresh doubt on the legitimacy of well-worn predictions of an upturn in the economy from central bankers and politicians over the past year or two. Manufacturing in Poland, largest of the former Communist countries of eastern Europe that joined the EU last May, contracted for a fourth month in April, according to NTC.
France's labour ministry said the jobless rate hit a 5-year high of 10.2 percent in March in the euro zone's second largest economy and another report by statistics office INSEE predicted a drop in demand for industrial goods.
Swiss National Bank boss Jean-Pierre Roth said his country was well placed to rebound but suffering from sluggish export demand from nearby European countries and that the international economic climate was "fraught with uncertainty".
One of the most frequently cited concerns is high world oil prices, still trading above $50 a barrel.
While the United States has been turning over faster, news this week that GDP expanded by an annualised 3.1 percent in the first quarter - less than 0.8 percent on a comparable basis with European figures - has stoked wider slowdown fears too.
Reuters released a survey of 45 fund managers on Friday that showed they had reduced exposure to shares and shifted more to surer-yield bonds and cash due to fear of softer global growth.
Sweden's central bank said after keeping rates as they are, at historic lows of 2.0 percent like those of the euro zone, and said economic prospects were getting increasingly uncertain, prompting some analysts to suggest the bank might even cut credit costs to shore up business activity.
Economists expect the European Central Bank, which has a rate-meeting next Wednesday in Berlin, to avoid rate rises too in the 12-nation euro zone, and an increasing number believe they may do so until the end of the year at least.
GDP DATA SOON, FORECASTS CUT: Hard evidence of what precisely happened to Europe's economy in the first three months of this year comes the week after next when countries start to publish data on gross domestic product.
Britain gave a taste when it said last week GDP grew at its slowest rate since late 2003 in January-to-March, 0.6 percent.
The extent of the concern over the current climate in Europe was highlighted throughout the week with business confidence indicators turning down in Germany, Italy and France in April.
German Economy Minister Wolfgang Clement said on Friday he now expected 2005 growth of 1 percent, no longer 1.6 percent.
Italy cut its growth forecast to 1.2 percent from 2.1 and hiked its deficit prediction on Friday from 2.7 percent of GDP to a range of 2.9-3.5 percent, according to political sources.
That raises questions over France's forecast of 2.0 percent to 2.5 percent growth this year, although France has stuck to the figure for now and been doing better than Italy and Germany because of stronger household spending.
For the eurozone as a whole, the European Commission has lowered its sights to growth of 1.6 percent this year but it and many other forecasts are counting on an upturn in the second half of the year that nobody can call with any certainty.
The island of Iceland looked even more isolated with a flood of foreign investment pouring into aluminium smelters and a house-buying frenzy causing the finance minister to predict runaway growth of 6 percent this year.
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