Rising optimism eases pressure on Europe鈥檚 central bank to act
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Eurozone economic sentiment rose more than expected in December and inflation expectations picked up, data showed yesterday, easing some pressure on the European Central Bank to further loosen monetary strings.
Sentiment in the eurozone’s southern, peripheral economies improved more than in core Germany and France.
Economic sentiment in the 17 countries sharing the euro strengthened by 1.6 points to 100.0 in the eighth straight month of gains, beating economists’ expectations, according to data released by the European Commission.
Economists polled by Reuters had expected an improvement to 99.1 points. The more optimistic numbers come as the ECB meets on interest rates, concerned that low consumer inflation risks being stuck in what the bank considers a “danger zone” for tipping into deflation.
“Improving economic news on the eurozone dilutes some of the pressure on the ECB to take immediate further stimulative (steps),” said Howard Archer, economist at IHS Global Insight.
“Although well below target eurozone consumer price inflation and still markedly falling bank lending to businesses suggest that the ECB will eventually need to act,” he said.
ECB policymakers have stressed there was no risk of deflation in the eurozone and the monthly Commission survey showed that consumer expectations of price trends over the next 12 months rose to 14.6 in December after dipping to 14.0 in November from 16.7 the previous month.
Also among manufacturers, selling price expectations continued to rise steadily to 2.4 in December from 1.5 in November and October’s 1.1.
Of the bloc’s five largest economies, economic morale in Spain jumped 4.0 points, 2.3 points in Italy and sentiment in the Netherlands was up by 1.5 points in December. Germany, the eurozone’s largest economy, and France, its second biggest, saw sentiment improving by 0.3 points.
Despite persistently high unemployment, stuck at a record of 12.1 percent of the workforce, optimism among eurozone consumers continued to grow, rising 1.8 points in December.
“Although the experience of past months shows that sentiment indicators are currently not a good indicator for the real economy, we see this data as evidence of a slow recovery of the eurozone economy,” said Christoph Weil, economist at Commerzbank.
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