Morale in the Eurozone rises despite its ongoing recession

City A.M. Reporter
CONFIDENCE in the Eurozone economy grew by more than expected in May, with hope that the worst of the crisis may be over spreading to countries that have been on its frontline.

Economic morale in the 17 states that use the euro increased by 0.8 points to 89.4, the European Commission said yesterday.

“This is in line with a moderate improvement, but we need to see this sustained,” said Francois Cabau, an economist at Barclays Capital. “We also need to see this translate into the real growth.”

In Greece, the first Eurozone state to be bailed out and heading for its sixth straight year of recession, sentiment climbed to a five-year high, while Portugal and Italy also recorded stronger readings.

“For the crisis countries, [this data offers] yet more signs that the worst is over. Southern Europe saw some of the strongest improvements,” Christian Schulz, senior economist at Berenberg Bank, wrote in a note.

The OECD said this week that it expects the Eurozone economy to contract by 0.6 per cent this year, rebounding by 1.1 per cent in 2014 – a more pessimistic picture for the bloc than predicted by the European Commission, which sees a 0.4 per cent contraction in 2013. After a strong start to the year, economic morale weakened in March, clouding hopes for swift recovery.

But in May confidence improved in all five of the Eurozone’s largest economies – Germany, France, Italy, Spain and the Netherlands. The upturn was notable across all sectors except for construction.

The bloc’s largest economy, Germany, which is expected to gather momentum in the second quarter of this year, saw a 0.6 point rise in its economic mood, while recession-hit France registered a 0.9-point jump.