Economic sentiment in the Eurozone improved in December

Economic sentiment in the Eurozone reported better-than-expected improvement in December, mainly due to better business optimism in France (+2.0), Germany (+1,6) and the Netherlands (1.9), as well as in while thanks to continuing growth of consumer inflation, according to the recent survey by the European Commission (EC). This is a sign of a positive start to the European economy in early 2017.

The index, which measures economic sentiment in the Eurozone, rose in December to 107.8 points from 106.6 points in November, while the expectations of financial markets was for a modest improvement to 106.8 points. Thus the index reached the highest level since March 2011.

The sharp improvement in economic sentiment in the Eurozone is a result of a solid increase in confidence in retail trade and industry in a slight improvement in services and construction.

The European Commission registers good growth in this important index in three of the five leading economies in the Eurozone, as the solid improvement marked economic confidence in France (+2.0), followed by the Netherlands (+1.9) and Germany (+1.6). However, the index marked deterioration in Spain (-2.2) and stagnation in Italy.

The index, defining the business climate in the Eurozone, which is an indicator of the current phase of the business cycle, rose in December to 0.79 percentage points in November after falling to a three-month low of 0.41 points, reached late last year at highest level since June 2011.

The latest European Commission study reported a sharp rise in the index measuring confidence in the industrial sector of the Eurozone (jump to 0.1 point from -1.1 points in November), improvement of the index assessing confidence in the services sector (growth to 12.9 from 12.2 points a month ago) and the index measuring confidence in the construction sector (increase to -12.0 from -12.8 points in November) and a sharp rise in the index assessing the credibility of the retail (jump from 1.5 points in November to 3.2 points in December).

The final index of consumer sentiment in the Eurozone at the end of last year rose to -5.1 points from -6.2 points in November, coinciding with the preliminary data of the European Commission.

While the index of expectations of manufacturers for their sales prices in the future, remains unchanged from the previous month at a level of 4.9 points, the index of consumer inflation expectations rose in December to 8.8 points from 6.3 points a month earlier.

Although the index of consumer inflation expectations still remains far below its long-term averaged level of 19 points, the results of today’s survey will be welcomed by the ECB and pursued by her aggressive stimulating monetary policy, which aims to raise inflation in the euro area to levels of just below 2%.

The European Commission’s data suggest that both businesses and consumers in the region still do not seem worried about their prospects in the new year despite the forthcoming 2017 series key parliamentary and presidential elections in the Netherlands, France and Germany start to the end of March important negotiations Britain leaving the European Union.

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