Euro-Area Economic Confidence Jumps to Highest Since 2011

german business confidence
  • Euro-Area Economic Confidence Jumps to Highest Since 2011

Euro-area economic confidence jumped to the highest since 2011 at the end of last year after the European Central Bank extended its stimulus and the recovery in the 19-nation region showed further signs of strengthening.

An index of executive and consumer sentiment increased to 107.8 in December from a revised 106.6 in November, the European Commission in Brussels said on Friday. That’s the strongest reading since March 2011 and compares with a forecast of 106.8 in a Bloomberg survey.

Economic momentum accelerated at the end of last year to the fastest in more than 5 1/2 years, according to a survey of purchasing managers, as the ECB extended quantitative easing to ensure a sustained pickup in inflation in a year of political uncertainty. While a surge in the cost of oil propelled consumer-price growth to the strongest in more than three years in December, underlying inflation pressures remained weak.

“In industry, we see a good recovery, both in Germany, where several industrial indicators have risen, as well as in the peripheral countries,” said Daniel Hartmann, an economist at Bantleon Bank in Zug, Switzerland. While rising oil prices may weigh on the economy, the global economic environment is positive, and “we continue to have tail winds from monetary policy.”

The euro was little changed after the report and traded at $1.0600 at 11:15 a.m. Frankfurt time.

Broad-Based Improvement

While the ECB will lower asset purchases to 60 billion euros ($64 billion) a month starting April, it prolonged the program that started in March 2014 through the end of the year. Policy makers have justified the reduction in the monthly QE amount with a “firming” economic recovery.

Sentiment improved across all sectors in December, with a gauge for industry jumping 1.2 points to 0.1, according to the report. A measure for services increased to 12.9 from 12.2, while consumer confidence was confirmed at minus 5.1, the highest level since April 2015.

Euro-area retail sales fell 0.4 percent in November from the previous month, according to a separate report from the European Union’s statistics office. In Germany, factory orders dropped 2.5 percent after a 5 percent surge in October, the country’s Economy Ministry said.

Trust in the region’s continued economic recovery is a reassuring sign in a year of potentially tumultuous politics.

France, Germany and the Netherlands will hold general elections in the next 12 months that are set to bolster support for populist parties, while the U.K. will start negotiating terms of its exit from the European Union and Donald Trump assumes the presidency in the U.S.

“The new year has several stumbling blocks along the way,” said Marco Wagner, an economist at Commerzbank AG in Frankfurt. Among other things, upcoming elections “will keep raising the question of EU unity whenever euro-skeptic parties achieve high results.”

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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