Euro zone sentiment edges to new four-year high in August

Confidence in the euro zone's economy edged up to a new four-year high in August as rising domestic demand marginally outweighed a worsening view of export prospects and the mood brightened particularly in France and Spain. 

PHOTO: BLOOMBERG

AUG 28, 20156:36 PM

[BRUSSELS] Confidence in the euro zone's economy edged up to a new four-year high in August as rising domestic demand marginally outweighed a worsening view of export prospects and the mood brightened particularly in France and Spain.

The European Commission's monthly economic sentiment indicator, published on Friday, rose to 104.2 in August, from 104.0 in July, against expectations in a Reuters poll of a slight dip to 103.8.

"The tentative increase in euro-area sentiment resulted from worsened confidence in industry being offset by improvements in the other business sectors (construction, services and, particularly, retail trade) and marginally higher consumer confidence," the Commission said in a statement.

ING's Bert Colijn said the increase showed the euro zone economy was resilient, with little impact yet from China's slowdown. The economy's expansion was above the long-term average but there was no sign growth would accelerate.

"The outlook indeed remains uncertain for euro zone industry as the recent appreciation of the euro and continued concern about Chinese economic growth will likely have an impact on the sector's output in the months ahead," he said in an email.

Among the larger euro area economies, overall economic sentiment increased in France (+0.9) and Spain (+1.7), but declined in Germany (-0.2), Italy (-0.6) and in the Netherlands (-0.3).

Sentiment in Greece, which secured a third bailout this month, plunged to its lowest level in more than six years.

The Commission's business climate indicator dipped to 0.21 this month from 0.41 in July.

Arguably of most importance for the European Central Bank (ECB), which launched a money-printing programme this year, the Commission said consumers' inflation expectations slipped to a four-month low of 3.1.

Industry selling price expectations also declined to a four-month low.

The ECB is widely expected to announce downwardly revised inflation forecasts after a governing council meeting next week, and some economists are expecting further steps to push inflation towards the ECB's target of just below 2 per cent.

In July, the rate was 0.2 per cent.

REUTERS