Eurozone economic confidence improved in January, marking the first increase since March 2011, driven largely by rising confidence in services, a survey carried out by the European Commission showed Monday.
The corresponding indicator rose to 93.4 from 92.8 in December. Economists had forecast an increase to 93.8 from December's original score of 93.3.
While this is a boost for hopes that Eurozone economic activity may be stabilizing, the fact remains that sentiment is still at a low level and the Eurozone is far from out of the economic woods, IHS Global Insight's European economist Howard Archer said.
Industrial confidence remained unchanged in January compared to the revised reading of -7.2 of December. The reading was forecast to rise to -6.8 from December's initial reading of -7.1.
Sentiment in construction increased to -28.3 from -28.9 in December. The sentiment in services rose to -0.6 from -2.6 in the previous month, thanks to more positive assessments of the past business situation, past demand and expected demand.
Retailers' confidence, meanwhile, dropped to -15.5 from a revised -12.2 in the previous month. Managers revised their employment intention upwards in all business sectors except for retail.
Consumer confidence rose to -20.7 in January, mainly on the back of easing unemployment fears. Consumers' assessment of the expected general economic situation and their own financial situation remained unchanged at the euro-area level.
A separate report showed that business confidence improved for the second month in a row in January, driven by a more positive assessment of production trends observed in recent months and of export order books. The business climate index came in at -0.21, up from -0.32 in December.
Managers' appraisal of stocks of finished products also improved. However, managers were more pessimistic about their overall order books, while their production expectations remained broadly unchanged in January.
The European Central Bank assessed that economic outlook is subject to high uncertainty and substantial downside risks. The bank has left its interest rates unchanged at 1 percent in December, after lowering it in the previous two months.
IHS Global Insight expects that persistently weak Eurozone economic activity will lead the ECB to trim interest rates by a further 25 basis points before long with the decision likely to be announced in March.
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