Euro-area confidence rises more than forecast

by BLOOMBERG

ATHENSEuro-area economic confidence surged more than economists forecast in September, giving European Central Bank (ECB) policymakers more positive news to consider as they decide on the future of their bond-buying programme.

The index of industry and consumer sentiment increased to 113 in September from 111.9 the previous month, the European Commission in Brussels said yesterday. The reading — the highest in a decade — was well above the median estimate of 112 in a Bloomberg survey.

The central bank’s Governing Council will have to weigh a booming economy against inflation showing few signs of a sustained pick-up toward its goal, when it decides on adjustments to the asset purchase programme on Oct 26. ECB president Mario Draghi said on Monday the central bank will maintain as much stimulus as the euro-area economy needs.

“The ECB is likely to take comfort from the ongoing strengthening of sentiment given that domestic demand looks set to continue to support economic growth,” Fabio Fois, senior European economist at Barclays plc in Milan said in a telephone interview.

The euro-region is seen expanding at an annual pace of 1.7% this year and 1.8% next, according to the Commission’s latest estimates. The ECB expects even higher growth in 2017, at 2.2%, while it also projects 1.8% expansion next year.

The Commission’s report showed an improvement in sentiment “on the back of higher industry, retail trade and construction confidence”. Sentiment in the industrial sector rose to 6.6 from 5 in August. Among consumers, confidence increased to -1.2 from -1.5 in the previous month, while a separate business climate indicator rose to 1.34, the highest since April 2011.

The Euro Stoxx 50 index gained 0.3% with banking stocks among top performers, helped in part by a rally in the German bund yields, after the confidence data were released. The euro was slightly up at 1.18 against the US dollar at 12:21pm in Frankfurt yesterday. — Bloomberg