Euro-area economic confidence beats forecast

BRUSSELS • Euro-area economic confidence surged more than economists' forecast this month, giving European Central Bank (ECB) policymakers more positive news to consider as they decide on the future of their bond-buying programme.

The index of industry and consumer sentiment increased to 113 this month from 111.9 the previous month, the European Commission in Brussels said yesterday. The reading - the highest in a decade - was well above the median estimate of 112 in a Bloomberg survey.

The central bank's governing council will have to weigh a booming economy against inflation showing few signs of a sustained pickup toward its goal, when it decides on adjustments to the asset purchase programme on Oct. 26.

ECB president Mario Draghi said on Monday that the central bank will maintain as much stimulus as the euro-area economy needs.

"The ECB is likely to take comfort from the ongoing strengthening of sentiment given that domestic demand looks set to continue to support economic growth," Barclays senior European economist Fabio Fois said in an interview.

The euro region is seen expanding at an annual pace of 1.7 per cent this year and 1.8 per cent next, according to the commission's latest estimates. The ECB expects even higher growth this year, at 2.2 per cent, while it also projects 1.8 per cent expansion next year.

The commission's report showed an improvement in sentiment "on the back of higher industry, retail trade and construction confidence".

Sentiment in the industrial sector rose to 6.6 from 5 last month. Among consumers, confidence increased to -1.2 from -1.5 in the previous month, while a separate business climate indicator rose to 1.34, the highest since April 2011.

In Germany, business confidence unexpectedly slid for a second month in September, according to Ifo Institute data on Monday. While that is a sign that Europe's largest economy is struggling to improve on its pace of expansion, data on Wednesday showed that Italian executives are the most optimistic they have been in a decade.

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A version of this article appeared in the print edition of The Straits Times on September 29, 2017, with the headline 'Euro-area economic confidence beats forecast'. Print Edition | Subscribe