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Recovery in eurozone continuing

Economic sentiment in the eurozone rose to a seven-month high and German unemployment dropped, keeping the region on a recovery path as the ECB prepares to unleash its quantitative-easing programme.

An index of executive and consumer confidence climbed to 102.1 in February from a revised 101.4, the European Commission said yesterday, beating the 102 median estimate in a Bloomberg survey.

In Germany, the number of people out of work declined a seasonally adjusted 20,000 to 2.81m, twice as much as predicted.

German economic growth accelerated in the fourth quarter, helping to lift the pace of eurozone expansion. Sentiment is picking up as concern about Greece’s future in the eurozone is countered by anticipation of more ECB stimulus and the boost to incomes from falling oil prices.

“Consumers are now clearly leading the turning of the eurozone economic cycle,” said Teunis Brosens, an economist at ING in Amsterdam. “With austerity out of the way in most countries, low oil prices, and the risk of a [Greece exit] contained for now, there is scope for further consumption-led growth in 2015.”

The commission report showed industrial confidence rose to minus-4.7 from minus-4.8 in January. Sentiment among consumers increased to minus-6.7 from minus-8.5, while confidence in the services sector declined.

In Germany, the adjusted jobless rate remained at 6.5% this month, the lowest level in records going back more than two decades. The number of people without work dropped by 11,000 in the western part of the country and 8,000 in the east.

“We are optimistic about the labour market, as companies and businesses will expand activity and maintain a good level of orders,” said Frank-Juergen Weise, president of Germany’s federal labour agency.

The eurozone jobless rate was 11.4% in December, according to Eurostat. Figures for January will be published on Monday. The economy expanded 0.3% in the fourth quarter.

“The short-term outlook looks much better than it did six months ago, due to lower oil prices and accommodative monetary policy from the ECB,” said economist Silvio Peruzzo of Nomura International. “But structural damage as a result of the crisis in the periphery is substantial, unemployment in countries like Spain remains high, and we’re yet to see strong wage growth.”

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