Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Eurozone Economic Sentiment Hits 10-Year High

Posted by hkarner - 1. September 2017

Date: 31-08-2017

Source: The Wall Street Journal

Improvement is led by rising confidence among industrial companies and the services sector

FRANKFURT—Economic sentiment in the eurozone reached its “highest level in more than 10 years”

in August, led by rising confidence among industrial companies and in the services sector, the European Commission said Wednesday.

Its Economic Sentiment Indicator, which aggregates business and consumer confidence, jumped to 111.9 from 111.3 in July. This marks the highest level since July 2007. Economists surveyed by The Wall Street Journal had expected a stable outcome.

Italy recorded the sharpest rise in economic sentiment among the region’s largest economies, followed by France and Spain—a sign the recovery is spreading. The mood, however, eased slightly in Germany and the Netherlands, the region’s traditional powerhouses.

The pickup in confidence underpins expectations that the eurozone will remain on its solid growth path in the second half of the year despite a stronger euro, and will be aided by domestic demand.

It also fuels economists’ expectations that the European Central Bank will soon begin to wind down its massive stimulus program, following in the footsteps of the Federal Reserve in the U.S.

ECB President Mario Draghi could signal as soon as the bank’s next policy meeting on Sept. 7 that stimulus will be gradually reduced from early 2018, economists say.

“Robust survey indicators in euro area countries suggest that growth should accelerate through the rest of the year,” while the consumer confidence indicator close to a 16-year high bodes well for the consumer-driven recovery, said Madhavi Bokil, a vice president at Moody’s Investors Service.

An improving economic outlook also prompted Moody’s to lift its growth forecasts for the eurozone to 2.1% in 2017 and 1.9% in 2018.

The European Commission said industrial companies in the 19-country euro currency bloc raised their employment plans in August and their selling-price-expectations increased, too.

Consumers’ price expectations, however, remained “virtually unchanged,” it said.

But some economists caution that a rising euro and geopolitical tensions pose risks to the upswing.

While it remains to be seen if the euro’s appreciation since the start of the year will put a dampener on exports, it is becoming “an increasingly important part of the debate around the next policy move for the ECB,” Angel Talavera, an economist at Oxford Economics, wrote in a recent note to clients. A rising euro threatens to hurt the international competitiveness of goods produced in the eurozone. It could also weigh on the outlook for inflation as it reduces the prices of many imported goods.

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