Eurozone economic confidence rose more-than-expected in February despite muted economic activity and sharp fiscal tightening in many economies.
The corresponding index climbed to 94.4 from 93.4 in January, survey results from the European Commission showed Tuesday. The reading was above the expected level of 94.
The improvement was broad-based across all sectors except for services, where a decrease in confidence partly offset the rebound observed in January.
The improvement in financial market sentiment and better economic news from abroad have made Eurozone consumers and businesses less gloomy about their economic prospects, ING Bank economist Martin van Vliet said.
Confidence in industry improved in February, moving slightly above its long-term average for the first time since November 2011. The indicator rose to -5.8 from -7 a month ago, and was also better than -6.9 point forecast. Likewise, retailers' sentiment came in at -14.3, up from -15.5 in January.
Confidence in the construction sector improved further to -24.5, thanks to a more positive assessment of order books and, notably, of employment expectations.
Sentiment among consumers improved slightly by 0.4 points to -20.3, based mainly on improved expectations regarding the general economic situation and consumers' own financial situation. The flash reading for February was -20.2. Confidence in services dropped to -0.9 from -0.7 a month ago.
The business climate indicator increased marginally to -0.18 from -0.21 in January. The improvement was mainly driven by a more positive assessment of production expectations, order books and stocks of finished products. By contrast, export order book and past production were assessed more negatively.
The improvement in confidence supports hopes that the Eurozone economy is past the worst after GDP contracted in the fourth quarter, Howard Archer, an economist at IHS Global Insight observed. Even so, the Eurozone is far from out of the economic woods, he said.
According to interim report of European Commission, euro area will enter a mild recession in 2012. The Brussels-based commission downgraded the 2012 gross domestic product outlook, forecasting 0.3 percent contraction for the region.
The latest Purchasing Managers' survey also showed a contraction in the private sector in February. The composite output index fell below the neutral 50-mark, to 49.7 in February from 50.4 in the prior month.
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