Confidence in the Eurozone economy has jumped to its highest level since before the debt crisis six years ago ravaged the bloc’s businesses.
The European Commission’s economic sentiment indicator rose above economists’ expectations to 108.2, a reading not seen since March 2011.
Industry confidence increased markedly, as production expectations grew more optimistic. However, confidence in the retail trade has fallen significantly, weighing on companies’ evaluation of business conditions which remained overall unchanged.
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France was the only country in which confidence in the economy decreased, highlighting the vulnerability of morale to political shocks. France is preparing for the first round of voting in its general election in April, which will see a strong challenge from the far-right Front National.
Howard Archer, chief UK and Europe economist at IHS Markit, said: “January’s further improvement in Eurozone business and consumer confidence is encouraging and bodes well for growth at the start of 2017 – but a significant concern remains that business and consumer confidence in the Eurozone could be increasingly pressurized over the coming months by political uncertainties”
Despite taking a knock after the UK’s referendum to leave the EU threatened to cause widespread economic chaos, confidence has increased steadily over the second half of the year.
The indicator hit all-time lows of 67.9 during the global financial crisis. While it has not approached those lows since then, the Eurozone debt crisis nevertheless caused a significant hit to confidence across the region.
Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “Another month, another solid EC sentiment report. Consumer sentiment edged higher, in line with the advance report last week. Elsewhere, the headline industrial and services confidence sentiment indices also moved higher.”