Eurozone Economic Sentiment At 7-Month High

Eurozone economic confidence strengthened to a seven-month high in January as there were strong improvements across all sectors except construction, survey data from the European Commission showed Monday.

The economic confidence index rose to 99.9 in January from revised 97.1 in the previous month. Sentiment improved for the third consecutive month to hit the highest level since last June, when the reading was 103.1.

The increase in overall confidence reflected strong gains in industry, services, retail trade and consumer sentiment, while morale declined in construction.

Underpinned by managers’ production expectations, the industrial sentiment index improved to 1.3 from -0.6 a month ago. The index turned positive for the first time in four months.

At 10.7, the services confidence index reached the highest since June. The score rose from 7.7 in December and economists’ forecast of 7.9.

The consumer confidence index matched the flash estimate of -20.9 in January versus -22.1 in the prior month. Sentiment strengthened for the fourth successive month as households were more positive about the general economic situation.

Driven by strong improvements in managers’ assessments of the past and expected business situation, sentiment among retailers improved in January with the index rising to -0.8 from -2.7.

In contrast, reflecting a sharp fall in employment expectations, the construction sentiment index slid to 1.3 from 3.6.

The employment expectations indicator increased by 2.7 points to 110.1 in January, and stayed well above its long-term average.

Further, the survey showed that selling price expectations lessened in industry, retail trade and construction, while they increased slightly in services. Consumer price expectations weakened again in January.

“The improvement in economic sentiment in January is consistent with the picture painted by other surveys,” Capital Economics economist Jack Allen-Reynolds said.

“But the high level of firms’ selling price expectations shows that the ECB’s work is far from done.”

The European Central Bank is widely expected to raise interest rates by 50 basis points in the policy session on Thursday.

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