Eurozone Confidence Hits Post-Crisis High
June 29 2017 - 4:37AM
Dow Jones News
By Paul Hannon
Eurozone businesses and consumers became more optimistic in June
about their prospects than at any time since before the global
financial crisis, reflecting a pickup in economic growth and the
rejection by voters of parties hostile to the European Union in
recent elections.
The surprisingly strong rise in confidence recorded by a monthly
survey should aid the eurozone's economic recovery, since
businesses and households are likely to spend more freely. That in
turn increases the likelihood that the European Central Bank will
soon consider the withdrawal of some of the stimulus to economic
growth that it has provided since mid-2014.
The European Commission Thursday said its Economic Sentiment
Indicator, which aggregates business and consumer confidence,
jumped to 111.1 in June from 109.2 in May, reaching its highest
level since August 2007, more than a year before the start of the
financial crisis. Economists surveyed by The Wall Street Journal
last week had expected a more modest rise to 109.5.
The rise was aided by France, where the national measure rose to
109.8 from 107.6 in May, a response to Emmanuel Macron's victory in
last month's presidential elections, and the strong showing of his
party in subsequent legislative polls. The pro-EU centrist has
pledged to remake the country's decades-old labor regulations and
give the eurozone's second-biggest economy the vigor it has long
lacked.
But other large eurozone members also saw big jumps, including
Germany and Spain.
The pickup in confidence has coincided with a period of renewed
optimism about the future of the European Union. Pessimism about
the bloc's prospects gained ground in the wake of the financial
crisis, and revived again last year as Britons voted to go their
own way in the Brexit vote.
But the first half of this year has seen a change in outlook,
with the Commission's Eurobarometer survey--which takes place twice
a year--recording that 56% of the 28,007 people questioned between
May 20 and May 30 declared themselves optimistic, the highest
proportion since early 2015.
That revival is something of a surprise. Coming into 2017,
nationalist political parties that were hostile to both the bloc
and the euro appeared to have momentum, while the U.K.'s Brexit
vote was a major blow.
However, those anti-euro forces failed to make a great deal of
headway, evidence that hostility to the EU has its limits in terms
of voter appeal, while a firming of the eurozone's recovery and a
continuing fall in unemployment has helped. According to the
Eurobarometer survey, 46% of those questioned described the EU's
economic situation as "good", the highest proportion since before
the global financial crisis.
The ECB has referenced the return of optimism as one reason for
its improved view of the eurozone's economic prospects. In a speech
Tuesday, ECB President Mario Draghi hinted that policy makers ECB
might start winding down its stimulus in response to accelerating
growth in Europe.
However, inflation is expected to remain below the central
bank's target of just below 2% over coming years, and the one part
of the Commission's monthly survey that didn't show fresh strength
were a series of queries on expected inflation. They recorded that
the rate of price increases expected by households and businesses
over the coming year remained little changed.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
June 29, 2017 05:22 ET (09:22 GMT)
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