Euro-Area confidence rises more than forecast to decade high

The index of industry and consumer sentiment surged to 113 in September, well above the median estimate provided by Bloomberg in a survey.
The index of industry and consumer sentiment surged to 113 in September, well above the median estimate provided by Bloomberg in a survey.PHOTO: REUTERS

BRUSSELS (BLOOMBERG) - Euro-area economic confidence surged more than economists forecast in September, giving European Central Bank policy makers more positive news to consider as they decide on the future of their bond-buying program.

The index of industry and consumer sentiment increased to 113 in September from 111.9 the previous month, the European Commission in Brussels said Thursday (Sept 28). 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 program on Oct. 26.

ECB President Mario Draghi said on Monday (Sept 25) 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," Fabio Fois, senior European economist at Barclays 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 in 2017, 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 in August. 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's a sign that Europe's largest economy is struggling to improve on its pace of expansion, data on Wednesday showed Italian executives are the most optimistic they've been in a decade.