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Eurozone economic confidence strongest since 2011

Staff Writer |
Eurozone economic confidence improved to the highest level in almost six years in February, survey results from the European Commission showed.

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The economic sentiment index rose marginally to 108.0 in February from 107.9 in January. The reading came in line with expectations and reached its highest level since March 2011, when the score was 108.3.

The improvement in confidence among industrial, services and construction companies outweighed the slippage in sentiment among consumers and retailers.

The industrial confidence index came in at 1.3 in February versus 0.8 in the prior month. The score was expected to rise moderately to 1.0.

The increase in industrial confidence was due to managers' markedly more optimistic assessment of the current level of overall order books, while their production expectations and their assessment of the stocks of finished products worsened.

The services confidence index climbed to 13.8 from 12.8, driven by managers' significantly brighter assessment of past demand, and to a lesser extent, the past business situation and demand expectations.

Meanwhile, the consumer sentiment indicator declined to -6.2, in line with flash estimate, from -4.8 in January. This marked decrease reflected more negative assessments of the future general economic situation, future unemployment and households' future financial situation.

While the retail trade confidence indicator dropped to 1.9 from 2.3, the indicator for construction rose to -10.3 from -12.9.

The strong improvement in construction confidence was fueled by upward revisions in both managers' employment expectations and their assessment of the level of order books.

Another survey from the EU showed that the business confidence index improved to 0.82 in February from revised 0.76 in the prior month. The expected score was 0.75.

Managers' views on both their overall and export order books improved strongly. Meanwhile, managers' assessments of their stocks of finished products and their production expectations worsened.

February's strengthening in business confidence bodes well for euro area growth in the first quarter at least at the start of 2017, IHS Markit Chief European Economist Howard Archer, said. But the slippage in consumer confidence fuels concern that a dilution of purchasing power coming from higher inflation could increasingly weigh down on consumers.

It is also highly possible that the United Kingdom's Brexit vote will impact more significantly on Eurozone confidence and activity in 2017 as the UK triggers Article 50, he added.

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