The economic sentiment indicator (ESI) for the European Union and the euro area dropped to a new low in January, the European Commission said on Thursday.

The ESI declined by 1.5 points in the 16-nation euro zone in January to 68.9 points and by 3.3 points to 64.9 in the 27-nation EU, the lowest level in both regions since the survey started in January 1985.

The drop was much less than in the last three months of 2008, said the Commission, the executive arm of the EU.

"The fall in the ESI for both the EU and the euro area is attributed to a general decline in confidence in all sectors, except for the retail trade sector which remained unchanged," said the Commission. Companies expect more jobs to be cut this year as demand shrinks.

Services, which declined most among all the five sectors, slipped by 4.9 points in the EU and by 4.8 in the euro area, while construction fell by 4.0 and 3.3, respectively.

Confidence declined drastically in Poland (-8.6 points), Britain (-7.4) and Germany (3.1), said the Commission.

According to the Commission, the industrial confidence indicator dropped by 1.8 points in the EU and by 0.4 in the euro area, both to minus 34 points, while consumer sentiment dropped by 2.3 points in the EU and by 0.8 in the euro area, both to minus 31.

Financial services managers' assessment of their business situation worsened further and they also expect the demand for their services to deteriorate substantially in the coming months.

(Xinhua News Agency January 30, 2009)