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Euro-area economic confidence up

Euro-area economic confidence unexpectedly increased in February, led by the services industry, easing pressure on the European Central Bank to take action next month to counter low inflation and spur growth.

An index of executive and consumer sentiment rose to 101.2, the highest reading since July 2011, from a revised 101 in January, the European Commission in Brussels said on Thursday. That beat the median estimate of 100.7 in a Bloomberg News survey of 31 economists.

“These movements are broadly in line with expectations,” said Anatoli Annenkov, senior economist at Societe Generale SA in London. “Economic conditions seem to have stabilised in many parts of the euro region, while Germany continues to deliver strong numbers.”

ECB President Mario Draghi on February 6 put investors on a month’s notice for further economic stimulus, saying the Frankfurt-based central bank needed “to get more information” on the recovery before making any decision.

“We are willing and we are ready to act,” Draghi said after the ECB held its benchmark interest rate at a record-low 0.25 per cent.

Since then, the European Commission raised its euro-zone economic growth forecasts for 2014 and 2015 to 1.2 per cent and 1.8 per cent, respectively. In the last three months of 2013, gross domestic product unexpectedly increased 0.3 per cent, extending the eurozone’s expansion to three quarters after a record-long recession.

The commission’s index of industrial confidence improved to minus 3.4 from minus 3.8 in January, Thursday’s report showed. The indexes for the services industry rose to 3.2 from 2.4, and sentiment strengthened in the retail and construction sectors.

Paris-based Air France-KLM Group’s chief executive officer Alexandre de Juniac said last week that Europe’s biggest airline expects a “more bullish” economic environment will help an earnings recovery driven by cost cuts this year.

Germany’s Volkswagen AG led a fifth monthly gain in European car sales in January as the region’s registrations advanced 5.2 per cent from a year earlier.

Still, not all the news has been positive. While raising its GDP forecast, the European Commission lowered its inflation outlook to one per cent this year and 1.3 per cent in 2015. The ECB seeks an inflation rate of below but close to two per cent. Unemployment remains near a record.

The commission’s consumer confidence gauge fell to minus 12.7 from minus 11.7 in January, Thursday’s report showed. Sentiment in the financial-services industry also worsened.

“After gross domestic product and PMI data, today’s survey may contribute to reassure the ECB,” London-based Barclays analyst Apolline Menut said by telephone. “Still, the decision will be complex as coming data could raise the pressure for further action, such as a weak reading for the first February inflation estimate.”