Eurozone, EU economic confidence firms with signs of recovery

BRUSSELS (AFP) - Clouds of economic gloom across the eurozone lifted Wednesday, as analysts hailed tentative signs of recovery with the latest European Commission data showing rising optimism among business leaders and consumers.

For the third month running, the EU's eurozone confidence index rose markedly against a background of rapidly easing tensions over Europe's three-year-old sovereign and banking debt crisis.

The index gained 1.4 points from the December level to reach 89.2, against a long-term average of 100.

While European stock markets fell on news the US economy contracted in the fourth quarter of last year, the euro jumped above US$1.35 (S$1.7) on the brighter data from the euozone, traders said.

And analysts wasted little time in declaring the positive signals as proof of recovery, even if consumer spending is expected to lag for some time.

"Sentiment rose in all major sectors, with an upturn in the large services sector particularly welcome," said Chris Williamson of London-based Markit.

But with confidence indicators widely understood as important pointers as to how the economy will perform going forward, the latest figures suggested that optimism is gaining ground, pulled by Germany in particular.

The index for all 27 members of the European Union also rose by 1.4 points to 90.6 points.

In the eurozone, the sector of activity where confidence rose most was the construction industry for which the indicator gained 4.6 points. This reflected orders taken and expectations concerning the need for labour.

Confidence in the services sector rose by 1.0 point.

However, for industry and the retail sector, the indicators were flat.

The data showed a tantalising suggestion that domestic demand may show signs of reviving as the reading for confidence expressed by consumers rose by 2.4 points in January.