Tuesday June 30, 2009
BRUSSELS: Eurozone economic sentiment improved more than expected in June, data showed on Monday, as the European Commission predicted the worst could be over for the 16-country currency area. A monthly survey by the Commission, the European Union's executive arm, showed economic sentiment in the eurozone rose to 73.3 points in June from 70.2 in May, the third improvement from a trough of 64.6 points in March.
In a separate, quarterly report, the Commission said the worst may be over for the eurozone, although growing unemployment posed a threat to recovery. "The worst seems to be behind us in terms of GDP contraction and our spring forecast predicts a subdued recovery for 2010," it said.
Analysts polled by Reuters had expected an increase in economic sentiment to 70.8 points. A separate business climate index released by the Commission also showed gains, but remained at weak levels. "Like many other surveys this indicator has underestimated the extent of the downturn in recent quarters," said Daniele Antonucci at Capital Economics.
"Hence, while we agree that the economy is no longer in free fall, we remain cautious at this stage," said Antonucci, noting there was still a mixed picture on the second quarter from core economic data released so far. Bayerische Landesbank economist Joerg Angele said the data heralded a slow recovery and expected the European Central Bank to keep interest rates low until the middle of next year.
The sentiment improvement was fuelled by the services sector, consumers and, to a lesser degree, industry. Morale in the construction sector stagnated and fell in the retail sector. "The increase observed at sector and country level is mainly driven by improving expectations, as the main economic actors seem to be gaining confidence that the crisis is easing," the Commission said in a statement.
The survey confirmed deflationary pressure in the eurozone. Inflation expectations 12 months ahead among households fell again in June to set a new low of -9 points from a downwardly revised -8 points in May, marking the third consecutive month of expectations of falling prices.
But selling-price expectations among manufacturers increased to -11 from May's -12. The European Central Bank watches inflation expectations closely in its policy decisions, aiming to anchor them at its price stability target of inflation just below 2 percent over the medium term.
With inflation moving to negative territory and recession persisting, the ECB has cut its main rate to a record low of 1.0 percent. Separately, the Commission said its business climate indicator rose to -2.97 in June from a revised -3.11 for May, fractionally above expectations but still at historically low levels.
(Reuters)
BRUSSELS: Eurozone economic sentiment improved more than expected in June, data showed on Monday, as the European Commission predicted the worst could be over for the 16-country currency area. A monthly survey by the Commission, the European Union's executive arm, showed economic sentiment in the eurozone rose to 73.3 points in June from 70.2 in May, the third improvement from a trough of 64.6 points in March.
In a separate, quarterly report, the Commission said the worst may be over for the eurozone, although growing unemployment posed a threat to recovery. "The worst seems to be behind us in terms of GDP contraction and our spring forecast predicts a subdued recovery for 2010," it said.
Analysts polled by Reuters had expected an increase in economic sentiment to 70.8 points. A separate business climate index released by the Commission also showed gains, but remained at weak levels. "Like many other surveys this indicator has underestimated the extent of the downturn in recent quarters," said Daniele Antonucci at Capital Economics.
"Hence, while we agree that the economy is no longer in free fall, we remain cautious at this stage," said Antonucci, noting there was still a mixed picture on the second quarter from core economic data released so far. Bayerische Landesbank economist Joerg Angele said the data heralded a slow recovery and expected the European Central Bank to keep interest rates low until the middle of next year.
The sentiment improvement was fuelled by the services sector, consumers and, to a lesser degree, industry. Morale in the construction sector stagnated and fell in the retail sector. "The increase observed at sector and country level is mainly driven by improving expectations, as the main economic actors seem to be gaining confidence that the crisis is easing," the Commission said in a statement.
The survey confirmed deflationary pressure in the eurozone. Inflation expectations 12 months ahead among households fell again in June to set a new low of -9 points from a downwardly revised -8 points in May, marking the third consecutive month of expectations of falling prices.
But selling-price expectations among manufacturers increased to -11 from May's -12. The European Central Bank watches inflation expectations closely in its policy decisions, aiming to anchor them at its price stability target of inflation just below 2 percent over the medium term.
With inflation moving to negative territory and recession persisting, the ECB has cut its main rate to a record low of 1.0 percent. Separately, the Commission said its business climate indicator rose to -2.97 in June from a revised -3.11 for May, fractionally above expectations but still at historically low levels.
(Reuters)
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