Eurozone Economic Sentiment Highest In A Year

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Economic sentiment in the Eurozone rose to its highest level in a year as the economy continues to recover from its worst recession.

Rising for the sixth straight month, the economic sentiment indicator rose to 82.8 in September from 80.8 in August, results of the latest business and consumer survey by the European Commission showed Tuesday. That is the highest reading since September 2008. Economists had forecast the index to log 82.5.

"The index is therefore now close to the pre-Lehman-bankruptcy level again," said Commerzbank analyst Christoph Weil. In the coming months, the indicator will continue to edge towards 100, irrespective of how strong the upturn proves to be, the analyst added.

Among the sub-indicators of the economic sentiment indicator, a measure for consumer confidence grew more than expected to minus 19 from August's minus 22. The industrial confidence indicator climbed to minus 24 from minus 25.

Sentiment indicator for the services sector climbed to minus 9 from minus 11 and that for the construction sector improved to minus 31 from minus 32. The only sector that registered a decline in sentiment was retail trade, where the indicator fell to minus 15 from minus 14 in the previous week.

Economic sentiment indicator for the European Union increased to 82.6 in September from 81 in August, with confidence rising in all sectors except services, where it stabilized.

A separate survey from the European Commission showed that the business climate index for Eurozone improved to minus 2.07 in September from August's revised reading of minus 2.18. The report noted that the level of the index remains very low, which suggests that year-on-year growth in industrial production was strongly negative in August. The modest rise in indicator was mainly due to an improving assessment of stocks of finished products, with slightly more optimistic views on production in recent months and production expectations than in the previous month.

Recent improvements in economic indicators suggest that the 16-nation economy is likely to recover in the second half of the year. The European Commission said in its interim forecast that the euro area is expected to grow 0.2% in the third quarter after contracting 0.1% in the second quarter. In the final quarter, the economy would be expanding at a slower pace of 0.1%. However, for the full year, it is forecast to contract 4%.

Elsewhere on Tuesday, the European Central Bank's governing council member Erkki Liikanen said as long as the output growth in countries remained modest and the output gap continued to grow, the risk of domestically generated inflation remains remote and the inflation outlook would be subdued. "Consequently, there is no need to rush to exit from monetary stimulus", he said in a Bank of Finland press conference.

Economic sentiment in the Eurozone rose to its highest level in a year as the economy continues to recover from its worst recession. (Market News Provided by RTTNews)