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Economic sentiment improves in the euro area, EU: European Commission

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Economic sentiment improves in the euro area, EU: European Commission

Growing industry confidence helped boost economic sentiment in Europe, according to a monthly report from the European Commission. The October Economic Sentiment Indicator jumped 0.9 points to 97.8 in the euro area and 1.1 points to 101.8 in the EU.

The Economic Sentiment Indicator compiles confidence indicators of five sectors throughout the European Union and euro area: industrial confidence, services confidence, consumer confidence, construction confidence and retail trade confidence.

Industry confidence rose in the euro area as a result of improvements in production expectations, overall order books and stocks of finished products. Industry managers also reported a better assessment of past production and exports orders, prompting employers to revise their hiring plans. Industrial employers expect to hire more workers as a result of growing confidence and improved business conditions. Consumer confidence rose for the 11th consecutive month, albeit marginally, as consumers expressed more confidence in personal savings and the future economic climate.

Service confidence, on the other hand, decreased slightly as a result of weaker demand expectations. Confidence also weakened in retail trade and construction, due to a drop in business expectations.

Like the euro area, EU managers expect to hire more workers as a result of improved business activity. Industrial confidence expanded at a slower rate in the broader EU, although confidence in the service economy improved markedly. Growth in service confidence was attributable to improvements in the United Kingdom, the non-euro area’s largest economy. The UK service economy expanded at its fastest rate in 16 years last quarter, according to the monthly Purchasing Managers Index. This helped propel the UK economy 0.8 percent in the third quarter, according to official GDP estimates.

Overall economic sentiment improved in three of the euro area’s five largest economies, led by the Netherlands, France and Germany. Economic sentiment declined in Spain and Italy, which continue to struggle with high unemployment and sluggish growth.

Overall, Europe’s business climate improved for the sixth consecutive month, according to the Business Climate Indicator. The indicator got closer to its long-term average, as managers expressed greater optimism regarding overall orders, production expectations and the export market.

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