Euro-area confidence unexpectedly rises on industry, services

ECB President Mario Draghi said this month that the central bank is ready to expand its quantitative-easing program if a decline in oil prices and a slowdown in emerging markets were to worsen the inflation outlook.
ECB President Mario Draghi said this month that the central bank is ready to expand its quantitative-easing program if a decline in oil prices and a slowdown in emerging markets were to worsen the inflation outlook. PHOTO: BLOOMBERG

AMSTERDAM (BLOOMBERG) - Euro-area economic confidence unexpectedly increased in September as sentiment in the industrial and services sectors improved.

The index of executive and consumer confidence rose to 105.6 in September from a revised 104.1 in August, the European Commission said on Tuesday. Economists predicted a decline to 104.1 from a previously reported 104.2, according to the median estimate in a Bloomberg survey.

With sentiment improving from Germany to Italy, the data add to signs that the euro area's recovery can withstand an economic slowdown in emerging markets such as China. A gauge of manufacturing and services activity in the region is signaling growth of 0.4 percent in the third quarter amid rising orders.

Nonetheless, the European Central Bank has held out the prospect of more stimulus. After six months of quantitative easing, policy makers cut their growth and inflation forecasts through 2017 earlier in September.

The Commission's report showed industrial confidence in the region increased to minus 2.2 from minus 3.7 in August as production expectations jumped. Sentiment in the services sector rose to 12.4 from 10.1 on prospects of improving demand in the coming months.

ECB President Mario Draghi said this month that the central bank is ready to expand its quantitative-easing program if a decline in oil prices and a slowdown in emerging markets were to worsen the inflation outlook. Core inflation slowed to 0.9 per cent in August from 1 percent in July.

Prices in the euro area have been almost stagnant since the ECB started its 1.1 trillion-euro (S$1.71 trillion) QE program in March. The inflation rate rose to 0.3 per cent in May before slowing again in the following months. Data scheduled to be published on Wednesday are likely to show a rate of zero for September, according to the median estimate in a Bloomberg survey, with predictions ranging from minus 0.2 per cent to 0.3 per cent.