Euro-Area Confidence Improves for First Time in Almost a Year
The sentiment has snapped an almost yearlong streak of declines.
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Euro-area economic confidence unexpectedly improved in May, snapping an almost yearlong streak of declines when the region was battling through a host of struggles.
The improvement was driven by industry and the strongest increase in production expectations in more than six years. That was despite continued negativity about export orders and the business climate. A separate report added to the upbeat news, with lending to households and companies picking up in April.
The figures will give hope to those predicting a pickup in momentum in the second half of the year. The confidence report from the European Commission showed stronger figures in Germany, France and Italy, the euro area’s three largest economies. Loans to euro-region households climbed 3.4% from a year earlier, the fastest pace since January 2009.
Still, in addition to international trade tensions that are weighing on sentiment and crimping corporate earnings, European businesses are grappling with slower global momentum and localized challenges like the structural change in the German car industry.
At the European Central Bank, the record of policy makers’ last meeting showed a number of officials losing faith in the idea of a return of more solid growth. A fresh batch of ECB growth and inflation forecasts will be unveiled next week, when rate-setters will decide if they warrant any addition stimulus to grease the wheels for the economy.
| May | April | |
|---|---|---|
| Economic Sentiment | 105.1 | 103.9 |
| Industry | -2.9 | -4.3 |
| Services | 12.2 | 11.8 |
| Consumer | -6.5 | -7.3 |
| Business Climate | 0.30 | 0.42 |
First-quarter growth in the 19-country region surprised to the upside, thanks to resilient consumer spending, though recent figures suggest the pace won’t be sustained. Germany’s Ifo index has dropped to the lowest since 2014 and euro-region manufacturing is still contracting.
That slump could intensify if the U.S. makes good on its threat to slap tariffs on European products. ECB Executive Board Member Peter Praet said in a newspaper interview this week that the “waiting mode that companies are in can be very damaging, especially for manufacturers.”
--With assistance from Kristian Siedenburg.
To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Paul Gordon
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