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Financial News: Eurozone Economic Confidence Strongest Since 2007

Eurozone Economic Confidence Strongest Since 2007

08/30/2017 - 08:56:00 (RTTNews)

(RTTNews) - Eurozone economic confidence reached its highest level in more than a decade in August, signaling above-potential growth in the bloc as the credit rating agency Moody's projected in its latest report.

The euro area as a whole is expected to grow around 0.3 percentage points faster in 2017 and 2018, Moody's Investors Service said Wednesday.

Driven by the solid momentum in Germany, the euro area is set to grow 2.1 percent this year and 1.9 percent in 2018 after 1.7 percent in 2016, the rating agency forecast.

Elsewhere, survey results from the European Commission showed that the economic confidence index rose to 111.9 in August from 111.3 in July. The reading was the highest since July 2007, when it was 112.6.

The score was forecast to rise slightly to 111.3 from July's initially estimated value of 111.2.

The rise in the EC's measure of euro-zone economic sentiment in August left the index pointing to stronger GDP growth ahead and will do little to take the pressure off the euro exchange rate, Stephen Brown, an economist at Capital Economics, said.

The difficult situation of healthy growth and weak inflation continues to trouble the European Central Bank ahead of next week's governing council meeting, Bert Colijn, an ING economist, said.

Although the economist expects at least a game plan from the ECB next week and probably a tasking of the relevant committees to investigate tapering options, he said the ongoing weakness in inflation expectations will not make ECB President Mario Draghi's life easier.

Moody's expects euro area monetary policy to become less supportive in 2018, provided that the current growth momentum remains intact.

Improved confidence in industry and services was partly offset by marked decreases registered in the retail trade and construction sectors, survey results revealed. Meanwhile, confidence among consumers remained broadly unchanged.

The industrial sentiment index improved to 5.1 in August from 4.5 in the previous month. The increase was triggered by a marked growth in managers' production expectations and a slight improvement in their assessment of the stocks of finished products.

Similarly, the services confidence index climbed to 14.9 from 14.2 in July. Higher sentiment resulted from managers' more positive assessment of the past business situation and higher demand expectations, while their assessment of past demand remained virtually unchanged.

The consumer confidence index came in at -1.5 in August, in line with flash estimate, versus -1.7 in the previous month.

Households' more optimistic views on their future financial situation and savings expectations were largely offset by more pessimistic assessments of the future general economic situation and future unemployment.

On the other hand, the confidence indicator for retail trade declined to 1.6 from 3.9 a month ago.

Retail trade confidence plunged due to managers' more negative views on all three components of the indicator that are the assessments of the present and expected business situation and of the adequacy of the volume of stocks.

The construction confidence indicator decreased due to markedly lower employment expectations and worsened assessments of the level of order books. The corresponding index slid to -3.3 from -1.8 a month ago.

Another report from the EU showed that the business sentiment index rose marginally to 1.09 in August from 1.04 in July.

Managers' production expectations increased markedly and their appraisals of the stocks of finished products and past production improved to a lesser extent. In contrast, managers' views on overall order books and, in particular, export order books deteriorated.

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