Euro zone economic morale jumps, easing pressure on ECB to act

BRUSSELS Thu Jan 9, 2014 6:47am EST

A statue depicting European unity is seen outside the European Parliament in Brussels September 5, 2013. REUTERS/Francois Lenoir

A statue depicting European unity is seen outside the European Parliament in Brussels September 5, 2013.

Credit: Reuters/Francois Lenoir

BRUSSELS (Reuters) - Euro zone economic sentiment rose more than expected in December and inflation expectations picked up, data showed on Thursday, easing some pressure on the European Central Bank to loosen monetary strings further.

Sentiment in the euro zone's southern, peripheral economies improved more than in core Germany and France.

Economic sentiment in the 17 countries sharing the euro in the month strengthened by 1.6 points to 100.0 in the eight straight month of gains, beating economists' expectations, data from the European Commission showed on Thursday.

Economists polled by Reuters had expected an improvement only to 99.1 points. The more optimistic numbers come as the ECB meets on interest rates, concerned that low consumer inflation risks being stuck in what the bank considers a 'danger zone' for tipping into deflation.

"Improving economic news on the euro zone dilutes some of the pressure on the ECB to take immediate further stimulative (steps)," said Howard Archer, economist at IHS Global Insight.

"Although well below target euro zone consumer price inflation and still markedly falling bank lending to businesses suggest that the ECB will eventually need to act," he said.

ECB policy-makers have stressed there was no risk of deflation in the euro zone and the monthly Commission survey showed that consumer expectations of price trends over the next 12 months rose to 14.6 in December after dipping to 14.0 in November from 16.7 the previous month.

Also among manufacturers, selling price expectations continued to rise steadily to 2.4 in December from 1.5 in November and 1.1 in October.

RECOVERY GAINS TRACTION

Of the bloc's five largest economies, economic morale in Spain jumped 4.0 points, 2.3 points in Italy and sentiment in the Netherlands was up by 1.5 points in December.

The euro zone's largest economy Germany and the second biggest France saw sentiment improving by 0.3 points in the last month of the last year.

Despite persistently high unemployment, stuck at a record of 12.1 percent of the workforce, optimism among euro zone consumers continued to grow, rising 1.8 points in December.

Analysts said the improving sentiment suggested the recovery gained traction in the last quarter of the last year.

"Although the experience of past months shows that sentiment indicators are currently not a good indicator for the real economy, we see this data as evidence of a slow recovery of the euro-zone economy," said Christoph Weil, economist at Commerzbank.

The Commission survey showed the manufacturing, retail and construction sectors all planned to hire more workers and consumers expect the number of people without jobs to fall.

A separate data release showed the business climate indicator, which shows the stage in the economic business cycle, edged lower to 0.27 in December from an upwardly revised 0.31 in November, but it still beat market expectations of 0.22.

(Writing by Martin Santa and Jan Strupczewski Editing by Jeremy Gaunt)

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Comments (1)
franklin61 wrote:
People have tons of economic problems in Eurozone, the crisis is nowhere near over. Jobs are nowhere to be found and public debt continues to become a serious problem. Politicians should have the good sense to turn to people who are capable of facing the problems related to the economic crisis, that is to say specialists in the economic crisis like the Orlando Bisegna Index from New York, who have created real anticrisis solutions made to measure over small areas of the territory, solving problems of bumpy public finances, unemployment and low income, and lightening the economic load of lots of families.

Jan 09, 2014 10:42am EST  --  Report as abuse
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