Thursday

28th Mar 2024

European economic mood improves further

  • European confidence in the economic outlook improved to its highest in more than two years in August (Photo: Wikipedia)

Businesses and consumers confidence in economy in both the eurozone and the whole EU continued to improve during August, most significantly in the UK and Germany, a monthly survey published by the European Commission Monday shows.

The Commission's overall Economic Sentiment Indicator (ESI) measuring executive and consumer sentiment rose to its 101.8 in the euro area during August, up from 101.1 in July, exceeding economists' forecast for an increase to 101.6. The indicator rose to 102.7 in the EU, up from 102.1 during the previous month.

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"August's improvement in overall eurozone sentiment is encouraging and suggests that the region as a whole may be relatively well placed to withstand the slowdown in the United States and China," Martin van Vliet, an economist at ING Bank NV, was quoted as saying by the Wall Street Journal.

The UK registered the most significant gain (+1.5), followed by Germany (+1.1). On the other hand, sentiment deteriorated in Italy (-0.9), Poland (-0.9) and even more so in the Netherlands (-2.1).

Confidence among consumers, which improved by 3 points in both the eurozone and the EU27 was influenced by "widely-felt optimism" about the general economic situation, as well as by easing of unemployment fears, the Commission wrote in the report.

Confidence indicator in services decreased by 1 point in the EU and improved by 1 point in the euro area. Sentiment in the retail sector gained 1 point in the EU and remained unchanged in the eurozone, while indicator in construction remained unchanged in both regions.

Although the improving confidence in the European economy was confirmed last week by a survey measuring economic activity across the private sector and also by the rise of the EU's GDP in the second quarter, the European Central Bank remains sceptical about its sustainability.

The ECB is expected this week to extend emergency support for eurozone banks until early next year, the Financial Times reported Monday. The possible threat to European economy in coming months might be weakness of the US economy and lurking crisis of public finances in some member states.

According to Bloomberg News, ECB President Jean-Claude Trichet said earlier this month that the second half of 2010 will probably be "much less buoyant" than the three months through June, when the euro-area economy expanded 1 percent, the fastest in four years.

'Swiftly dial back' interest rates, ECB told

Italian central banker Piero Cipollone in his first monetary policy speech since joining the ECB's board in November, said that the bank should be ready to "swiftly dial back our restrictive monetary policy stance."

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