Economic and business confidence in the Eurozone rose in September for the fourth consecutive month, reaching its highest level for more than a decade. The main contributor to the increase was the growing optimism in all key sectors, excluding financial services. This is probably a sign that confidence does not seem to be negatively impacted by the prospects for a gradual reduction in the ECB’s quantitative easing program next year.
According to the latest European Commission survey, the index measuring economic confidence in the Eurozone rose to 113.0 points from 111.9 points in August, while financial market expectations were for modest growth to 112.0 points.
This is the highest level of the index since July 2007. The new growth in economic confidence is the result of sharply improving confidence in the industrial and construction sectors as well as in retail, but with a more reluctant upswing in services and consumer confidence, with only the financial services sector reported worse deterioration.
The European Commission recorded an increase in the economic confidence index in all five leading economies in the region. The strongest growth was reported in the Netherlands (increase by 1.9 points), followed by Italy (by 1.8 points), Spain (by 0.6 points), Germany (by 0.5 points) and France (an increase of 0.4 points).
The Benchmark, which is an indicator of the current business cycle phase, also increased sharply in September to 1.34 points (the highest level since April 2011) from 1.08 points a month earlier and expectations for weaker growth to 1.12 points.
The latest EC survey shows a robust improvement in confidence in the industrial and industrial sector (up 6.2 points from 5.0 points a month earlier) and in construction (from -3.3 points to -1.7 points) and retail trade (from 1.6 points to 3.0 points). A slight improvement was recorded in service confidence (from 15.1 points to 15.3 points), with confidence in financial services alone deteriorating (from 25.6 points to 18.8 points).
The final consumer confidence index in the Eurozone rose in September to -1.2 points from -1.5 points in August, reaching a new highest level since April 2001.
The index, assessing consumer inflation expectations for the next 12 months, rose sharply to 14.2 points from 11.6 points in August, while the analogous price index in the industrial sector grew in September to 10.5 points from 8.1 points in the previous month, and in services – up to 8.0 points from 6.4 points in August.
The further strengthening of economic confidence to a new 16-year high supports the expectations that the Eurozone will remain on the path of solid growth in the second half of the year, despite the sharp appreciation of the Euro, while increasing consumer confidence is a new signal that strong domestic demand will continue be a major driver of economic growth in the region.
Today’s EC business survey, including signs of rising inflationary pressures, may reinforce the expectation that the ECB will soon signal the start of a process of cutting huge stimulus monetary policies, following the similar steps taken earlier this month by the US Federal Reserve.