Economic sentiment in eurozone increases

Economic sentiment in the eurozone unexpectedly rose in October in a sign that the 18-nation region has moved one step away from a renewed economic downturn.

An index of executive and consumer confidence increased to 100.7 from 99.9 in September, the European Commission said in Brussels yesterday. That’s the first gain in three months. Economist predicted a drop to 99.7, according to the median of 29 forecasts in a Bloomberg survey.

The report may help the region escape a spiral of declining confidence and falling output prompting businesses to delay investments because of the negative assessment of the situation by other companies.

The eurozone economy failed to grow in the second quarter and ECB president Mario Draghi has warned that spending may also suffer if prices fall. “These confidence indicators are indeed very important to watch as there’s an element of a self-fulfilling prophecy,” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam. “Fundamentals are still pointing in the direction of a gradual recovery for the euro area.”

Industrial confidence rose to minus 5.1 in October from minus 5.5 in September, according to the report. Sentiment in the services, retail, and construction sectors also improved. Gross domestic product rose 0.2% in the July to September period, according to a separate survey, and a Purchasing Managers’ Index published on October 23 showed manufacturing unexpectedly expanded this month.

The German economy probably grew 0.3% in the third quarter after a 0.2% contraction in the second. Joblessness unexpectedly declined by 22,000 this month, the most since April, with the unemployment rate unchanged at 6.7%, the Federal Labor Agency said. Even so, business confidence dropped for a sixth month and investor sentiment fell to the lowest since 2012. “We’ve been in a phase the last few months where many of the indicators have come in slightly lower than expected,” ECB Governing Council member Ardo Hansson said. Still, “it’s a very heterogeneous picture”.

Daimler, the world’s third-largest maker of luxury vehicles, reported third-quarter profit on October 23 that exceeded analysts’ predictions as deliveries of the Mercedes-Benz S-Class more than doubled. BASF SE, the Germany based chemical maker, cut profit targets last week and abandoned its sales goal for next year, citing “reduced growth dynamics of emerging markets and a delayed recovery in the European economy.”

The EU’s statistics office will publish GDP data for the third quarter on November 14 following releases by France, Germany, and Italy on the same day. Spanish growth slowed to 0.5% in the three months through September from 0.6%, the National Statistics Institute said.

Bloomberg