Eurozone economic sentiment picked up moderately in May, driven by improved confidence in all business sectors except for construction, survey results published by the European Commission showed Thursday.
The economic sentiment index climbed to 89.4 in May, in line with expectations, from 88.6 in April.
However, IHS Global Insight's Chief European Economist Howard Archer said sentiment is still pretty muted and fragile, and the situation varies markedly between countries.
According to Ben May at Capital Economics, the index now points to annual falls in GDP of around 1.2 percent, a little weaker than the first quarter's annual decline of 1 percent.
The survey still suggests that euro-zone GDP is shrinking, implying that the European Central Bank may eventually announce more policy support, the economist observed.
The Paris-based Organization for Economic Co-operation and Development this week downgraded Eurozone GDP outlook, citing lingering effects of the debt crisis, the ongoing drag from fiscal consolidation and weaknesses in credit markets.
It now forecast the 16-nation bloc to contract 0.6 percent in 2013 and a rebound next year, with GDP rising 1.1 percent.
The survey data today showed that industrial confidence came in at -13 in May, up from -13.8 a month ago. The indicator gained strength from a much more positive assessment of the current level of overall order books.
Confidence in services improved to -9.3 from -11.1. The surge in sentiment results from significantly improved assessments of the past business situation and past demand, as well as to a lesser extent, managers' improved demand expectations.
Retailers' confidence rose to -16.8 from -18.4, driven by sharply improving business expectations, a more positive assessment of the volume of stocks and mildly improving appraisals of the present business situation.
Consumer confidence increased slightly by 0.4 points and for the sixth consecutive month. The index now stands at -21.9. The survey showed that consumers' expectations for the future financial situation of their households brightened and unemployment expectations declined, while consumers were slightly grimmer about the future general economic situation.
Meanwhile, confidence fell to -33.6 from -31.7 in the construction sector. The decline reflected worsened assessment of both order books and employment expectations.
Another survey from the commission showed improvement in business confidence after worsening in April. The business climate index came in at -0.76 compared to -1.04 in the previous month and better than the expected reading of -0.85.
While production expectations deteriorated slightly, managers' appraisal of the stocks of finished products, order books and past production improved, the report showed.
