Consumer confidence improved marginally in the Euro area in October, with a flash estimate of -14.5, after September's -14.9. This is the 11th month on the trot to see a gain, and the reading is its highest since July 2011. It remained unchanged in the EU at 11.7.
Berenberg's Christian Schulz says: "the indicator is gradually approaching its long-run average of 13.3, but so far points to stabilisation or modest growth rather than strong consumption growth. The Eurozone recovery remains export- and investment-led, not a consumer-led."
Capital Economics highlights the over-optimism the index can express and, although the situation is obviously improving, warnts that "strong and sustained recovery in consumer spending is still some way off."
Schulz goes on to point out that Eurozone countries are at different stages of recovery, and healthy countries, like Germany, can see confidence a little above average, signifying moderate growth. A sharp rise in confidence in crisis countries has been seen, he says, as economic tail risks have faded, with tax increases and spending cuts, in the main, over.
Despite improvement in the Eurozone's labour market providing a boost to confidence, employment continues to fall, with access to credit constraining consumption. But, says Schulz, "stabilisation of private consumption in combination with less government cutbacks may be enough to allow these economies to grow on exports and investment, as Spain, Portugal, Ireland and Greece have demonstrated this spring and summer."
Consumer spending may well pick up over the next few months but spending will most likely be modest. Capital Economics says "households cannot be relied on to power a strong economic recovery."