VIENNA (Alliance News) - Eurozone economic confidence improved for the tenth consecutive month to a 31-month high in February driven by upbeat services and industrial sentiment, survey data from the European Commission showed Thursday.
The economic sentiment index rose unexpectedly to 101.2 in February from 101 in January. The score was forecast to drop to 100.7.
In the euro area, marginal increase in economic confidence was due to enhanced confidence in construction and, to a lesser extent, services, retail trade and industry. At the same time, confidence among consumers worsened in February.
Industrial confidence registered a small improvement backed by managers' slightly more optimistic assessment of the stocks of finished products and the current level of overall order books. The indicator rose to -3.4 in February from -3.8 in January.
Likewise, confidence in services rose to 3.2 from 2.4. The growth resulted from firms' more positive assessment of past demand and the past business situation, while their appraisal of expected demand remained broadly stable.
Meanwhile, consumer confidence fell to -12.7 in February from -11.7, as a result of worsened expectations about savings, unemployment and the future general economic situation. The reading matched the flash estimate published on February 20.
The measure of retailers' sentiment rose to -2.9 in February from -3.4 in January. The increase was driven by managers' more positive evaluation of the present business situation, which was partially offset by less positive business expectations. The appraisal of the volume of stocks remained broadly unchanged.
Confidence in construction rose to -28.5 from -29.8 a month ago, resulting from a markedly improved assessment of order books coupled with a downward revision of employment expectations.
Another report from the European Commission showed that overall business confidence improved to 0.37 in February from 0.25 in January. The expected score was 0.20.
Firms' appraisal of the past production, the stocks of finished products as well as the current level of overall order books and export order books marked an improvement. At the same time, production expectations were virtually unchanged.
Though the survey provides further signs that economic conditions are improving in the Eurozone, the region still looks set for a period of weak GDP growth, Ben May, a European economist at Capital Economics said.
The EU this week raised the euro area growth forecast for 2014 to 1.2% from 1.1%. The projection for 2015 was lifted to 1.8% from 1.7%.
Data from the European Central Bank today showed that loans to the Eurozone private sector continued to decline in January, while the broad money supply growth accelerated slightly.
Loans to the private sector dropped 2% year-on-year as seen in December. At the same time, M3 grew 1.2% year-on-year in January, which was slightly faster than the 1% rise seen in December.
While the weak money and credit growth figures argue in favor of further monetary easing, the sentiment improvement in February give the hawks on the ECB's governing council some ammunition to make the case for a continued wait-and-see stance, Martin van Vliet, an economist at ING Bank NV said.
After the G20 meeting in Sydney, European Central Bank President Mario Draghi said the bank is ready to act if the outlook for prices deteriorates, although he sees no fear of deflation in the euro area.
The ECB will have the full set of information needed to decide whether to act or not by its next rate-setting meeting on March 6, Draghi said. The bank will also release its inflation estimates for 2016 for the first time in March.
