Eurozone Consumer Confidence Drops to 5-Year Low

Data released Monday from the European Commission showed that consumer confidence dropped to a five-year low in July. The drop in consumer confidence signals that the European Debt Crisis and recession continue to dampen consumer expectations and limit consumption growth.

The European Commission reported that consumer confidence fell to -21.6 in July and that June's number was revised lower to -19.8. Economists had been anticipating a reading of -20.0. The reading is the lowest level in nearly five years, dating all the way back to August of 2008. Lower consumer confidence generally leads to lower spending by consumers.

The data does not bode well for retailers with large presences in Europe. General Motors (NYSE: GM) and Ford (NYSE: F) both traded to 52-week lows Monday, following GM's guidance last week that expects European sales to continue to be weak. GM shares slumped to new 52-week lows and the lowest level since its re-IPO.

Should the recession in Europe continue and the debt crisis deteriorates, consumer confidence could fall further. Spain and Spanish consumers could be the driver of a fall in this sentiment, as they were sold bank debt as investment alternatives to sovereign bonds, as they were told that the bank debts were ultra-safe. As losses mount on these bonds, they may be forced to sell at a loss, curbing spending, and hurting the economy further.