Euro zone economy sentiment rises in Dec, first time since start of Ukraine war

A shopper pays with a ten Euro bank note at a local market in Nice
A shopper pays with a ten Euro bank note at a local market in Nice, France, June 7, 2022. REUTERS/Eric Gaillard

BRUSSELS, Jan 6 (Reuters) - Euro zone economic sentiment improved in December for the first time since the start of the war in Ukraine, European Commission data showed on Friday, with more optimism across all sectors of the economy and a sharp drop in inflation expectations.

The Commission's monthly economic sentiment index rose to 95.8 in December from 94.0 in November, the first upward movement after a slide from a record high of 114.0 scaled in February, the month Russia invaded Ukraine.

The mood in industry improved to -1.5 from -1.9 and the sentiment in the services sector, the euro zone's biggest contributor to growth, more than doubled to 6.3 from 3.1.

Consumers, retailers ad the construction industry were also all more optimistic, signalling that the expected economic slowdown in the last three months of 2022 and the first three months of 2023 is likely to be a shallow one.

Also inflation expectations 12 months ahead among consumers fell sharply in December to 23.7 points from 29.9 points in November and manufacturers' selling price expectations fell to 38.4 points from 40.4 in November.

Separately, euro zone retail sales rebounded more than expected in November thanks to higher fuel sales at petrol stations, the European Union's statistics office Eurostat said.

Eurostat said the volume of retail sales in the 19 countries sharing the euro last November rose 0.8% month-on-month, rebounding from a 1.5% slump the previous month, for a 2.8% year-on-year decline. Economists polled by Reuters had expected a 0.5% monthly rise and a 3.3% year-on-year fall.

The volume of sales of automotive fuel in specialised stores rose 1.0% month-on-month in November, and 4.4% year-on-year helping to limit the downward pull on the index from falling sales of other products.

Retail sales are a proxy for consumer demand which has suffered from high energy prices that triggered a record surge in consumer inflation.

Reporting by Jan Strupczewski Editing by Tomasz Janowski

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