Europe's economic confidence on two-year high
30.07.10 @ 09:48
European confidence in the economic outlook rose to the highest in more than two years in July, as rising demand for industry products, overall optimism and declining German unemployment boosted the general mood.
The Economic Sentiment Indicator produced by the European Commission which shows the economic mood based on the surveys of managers and consumers rose in July by 1.9 points to 102.2 in the EU and by 2.3 points to 101.3 in the euro area, the commission said on Thursday (29 July).
However, the results were uneven in the euro area, with Germany (up 4.0) and France (up 2.6) among the countries with a significant rise. Economic sentiment declined sharply in Spain (down 2.2).
"July's improvement in the commission's consumer and business surveys adds to the evidence that the eurozone is performing surprisingly well but with stark divergences between countries," Jennifer McKeown, senior European economist at market research group Capital Economics, told AFP.
Nevertheless, it may help boost confidence in the single currency and the EU's economy.
"July's sharper-than-expected increase in economic sentiment will further allay fears of a near-term double dip recession in the eurozone and may give fresh support to the euro," Dutch banking group ING said in a note.
The main contributor to the overall rise was a two point rise in the industry sector, which is reporting improvement in demand for its products. However, managers are still cautious about their production expectations, keeping their capacities at 77 percent in both the EU and the euro area, three points below the long term average.
The significant easing of unemployment fears in Germany and rising confidence in both the service sector also contributed to the overall improvement. Service sector improved by two points and the retail sector rose by four points in the whole of the EU, a an adjustment driven mainly by business expectations in the UK and Germany.
At the same time, sentiment in the construction sector remained unchanged and confidence in financial services in the whole EU dropped (down 6) for the second time in a row. In the euro area, confidence continued to increase (up 3). A gauge of confidence among consumers rose to minus 14 in July from minus 17 in June, the commission said.
