Euro-Area Confidence Highest in 21 Years as Economy Reopens

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Confidence in the euro-area economy improved to the highest level in more than two decades in June as a reopening of shops, restaurants and other services propelled the region’s recovery from the pandemic crisis.

A European Commission sentiment index increased to 117.9, exceeding almost all estimates in a Bloomberg survey. The gain was driven by surging optimism in services, though industry, retail trade and construction also improved.

The region’s economy is rebounding rapidly as infection rates drop and pandemic restrictions are lifted. Many countries expect demand over the summer months to surge as travel and business activity resumes, though some are still exercising caution over the spread of Covid-19 variants.

“There is still a health risk,” French Finance Minister Bruno Le Maire told CNews Television on Tuesday, as he urged people to get vaccinated. “The only obstacle left in the way of a strong recovery in growth in 2021 and a return to normal in early 2022 is the risk of the variant and the pandemic.”

Confidence in June rose in five of the six largest European Union countries, with only Spain seeing a slight decline.

While the boom has raised fears in some quarters over high inflation, a separate report on Tuesday showed that consumer-price growth in Germany, the region’s largest economy, slowed to 2.1% in June from 2.4%.

The Bundesbank, along with the European Central Bank, says price pressures this year are largely driven by temporary factors, though Bundesbank President Jens Weidmann said on Monday that “upside risks predominate.”

Euro-area services posted the fourth “significant” improvement in a row, and industrial confidence reached an all-time high. Still, a supply squeeze continued to weigh somewhat on manufacturers, whose stocks were considered scarcer than ever.

Sentiment among consumers increased for a fifth consecutive month, and employment expectations also rose, driven by more optimistic hiring plans in industry and services.

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