Euro zone sentiment drops in March, ends four months of gains

BRUSSELS (Reuters) - Confidence in the euro zone's economy worsened in March, falling after four straight months of gains, the European Commission said on Wednesday.

Economic sentiment in the 17 countries using the euro decreased by a worse-than-expected 1.1 points to 90.0. Economists polled by Reuters had expected a decline to 90.4.

The survey appears to be the first to show the impact of the Cypriot crisis on business confidence across the euro zone, although the study makes no specific reference to the fallout from the chaotic bailout that began following a meeting of euro zone finance ministers on March 15-16.

The decline in confidence put a halt to a recovery that had begun in November last year, undermined by a much more negative outlook from manufacturers, who had been helping Europe's economy through exports.

The euro zone's measure of the business cycle also reflected this worry, posting a fall in March of 0.14 points to -0.86.

Factories also worsened their evaluation of their past performance and export order books, with the European Commission saying they had "declined markedly".

Services also broke a trend of rising confidence since October, with managers of everything from health clinics to theatres lowering their expectations for consumer demand.

One bright spot in the Commission's data was the relatively stable consumer confidence, which increased 0.1 points, due to higher expectations by consumers of their possibilities for employment.

For European Commission data click on:

(Reporting by Ethan Bilby; editing by Rex Merrifield)