The January Economic Sentiment Indicator for the Eurozone rose for the ninth straight month, reports Team IFM.
Brussels, February 3, 2014: Economic confidence in the Eurozone grew for the ninth straight month in January, with the Economic Sentiment Indicator – an index to gauge confidence levels – gaining 0.5 points, data from the Business and Economic Survey results released by the European Commission showed.
The rising curve, being witnessed since May 2013, was also visible in the European Union area, where the index rose to touch 100.4 points – registering an increase of 0.9 points. However, the Commission admitted that the scope of improvement in confidence levels, both in terms of scope and magnitude, had “moderated”.
“The survey indicates that the economic recovery is slowly building momentum,” RTT newswire service quoted Ben May, economist at Capital Economics, as saying. “But Eurozone’s recovery looks set to remain distinctly lacklustre in comparison to those of the US and UK.,”
The consumer confidence index of The Conference Board, a New York-based economy tracker, said on Tuesday expectations of Americans had registered an upward climb for the second month in a row in January. In fact, the Board said, the reading for consumer confidence was the best since August and reflected rising optimism among US households about the labour market and business conditions.
In contrast, industry confidence fell by a marginal 0.5 points, which the survey report said stemmed from “managers’ worsened assessment of the stocks of finished products”. However, the index did not take into account their assessment of the current levels of order books, which was “broadly stable”.
The confidence in the services and retail sectors, two factors that drove up economic sentiments in Eurozone, were shown by managers. In the first instance, they expected both demand expectations and the business situation to improve. In retail, they also expected volume of stocks to rise, apart from predicting an overall business climate improvement.
The most remarkable uplift was registered in case of consumer confidence, which rose to a 30-month high since July 2011; the index shot up by 1.8 points to reach a level above its long-term average. The survey report attributed this to improved expectations from the job market and hopes of a better economic situation.
Consumers also believed their household finances would improve even as their assessment of personal savings over the next 12 months remained unchanged. However, the survey conceded, this increase in hope was “to a lesser degree”.
Interestingly, sentiments proved to be most robust over financial services, which is not included in the Economic Sentiments Indicator, and was assessed to be have risen 4.1 points. This was primarily on account of business situations in the past and heightened expectations of rising demand.
Europeans, like the Americans, have started believing the job market will look up – especially in the services and retail segments, the survey report said. They however didn’t expect much recruitment in industry while their expectations in the construction sector took a dive.
In fact, the construction sector has greatly worried managers too, the survey data has reflected. Managers expressed concern over the position of their order books. This, and falling expectations of recruitments in this industry combined to drive the index southwards by 3.7 points.
Price expectations among consumers for the next 12 months remained unchanged.
EU Development
The improvement in sentiments in the European Union, which covers 10 more countries than the Eurozone, was a bit more discernible, including in the two largest non-Eurozone EU economies – Poland and the UK.
Sector-wise in these two countries, confidence levels were in keeping with that displayed in the Eurozone areas: up regarding services, retail and among consumers but down when it comes to industry.
Over all in the European Union, the index inched up 0.9 points.
Unlike the show of no-confidence in the Eurozone, confidence levels were stable in the construction sector in the overall European Union area, mainly on account of this segment doing markedly better in the UK.
Similarly, people were more optimistic in the wider EU area about employment opportunities gaining ground in general, though overall, confidence over newer jobs in the services sector dropped.
The quarterly manufacturing survey, which was conducted in January, showed respondents estimated the capacity utilisation rate to perk up markedly to 80 per cent. In keeping with this brighter assessment, more managers found their current manufacturing capacity “not sufficient”. This was primarily because their expectations of the current book orders and future demand had risen.
Alongside, their assessment of procuring new orders and their export volumes improved as compared to the last survey in October. In an extension of their assessment of their outlook on new orders and exports to foreign markets outside the European Union also improved exponentially.
Managers’ expectations of their orders on hand remained unchanged from that found in the October survey.
Developments in the wider EU region were largely in sync with that in the Eurozone.
Business Climate
In January, the Business Climate Indicator (BCI) for the euro area remained virtually unchanged at 0.19 points. Production expectations of managers, their appraisal of the past production and their assessment of the level of both overall and export order books remained broadly unchanged.
The level of the stocks of finished products was assessed more negatively.
Moreover, the Business Climate Indicator (BCI) for the euro area remained virtually unchanged, with managers foreseeing little alterations in their production expectations, their appraisal of the past production and their assessment of the level of both overall and export order books.