2020.01.3010:14:00UTC+00Eurozone Economic Sentiment At 7-Month High, Jobless Rate Lowest Since 2008

Eurozone economic confidence reached a seven-month high in January and the unemployment rate hit the lowest in more than a decade in December, data showed Thursday.

The economic sentiment index rose more-than-expected to 102.8 in January from 101.3 in December, survey results from the European Commission revealed. This was the highest reading since June 2019 and above the forecast of 102.0.

The improvement resulted from marked increases in confidence in the industry and construction sectors, while retailers were somewhat less confident. Confidence among consumers and in the services sector remained virtually unchanged in January. The strong increase in industry confidence to -7.3 from -9.3 resulted from managers' more optimistic views on all three components, namely production expectations, the stocks of finished products and the current level of overall order books.

On the other hand, in services, the confidence indicator dropped 0.3 to 11.0 largely due to worsened assessment of past demand.

The consumer confidence index remained unchanged at -8.1 in January, reflecting households' broadly stable assessments of both their past and future financial situation. A slight increase in their intentions to make major purchases was offset by a decrease in general economic situation outlook.

The marked rise in construction confidence by 1.2 points to 6.9 in January was fueled by managers' improved assessment of the level of order books, while their employment expectations remained virtually unchanged.

Meanwhile, the retail trade confidence indicator dropped to -0.1 in January from +0.7 in the previous month, mainly due to a sharp drop in managers' assessment of both the present and future business situation.

Another survey from EU showed that business sentiment improved marginally in January. The corresponding index came in at -0.23 versus -0.32 in December. Elsewhere, data from Eurostat showed that the unemployment rate in the currency bloc fell to 7.4 percent in December from 7.5 percent in November. This was the lowest since May 2008.

The number of people out of work decreased 34,000 from the previous month to 12.251 million in December. Compared to last year, unemployment declined 592,000.

The youth unemployment rate came in at 15.3 percent in December, down from 15.4 percent in November.

According to EU survey, employment plans showed a significant improvement in industry, while remaining broadly unchanged in retail trade, services and construction.

Selling price expectations increased markedly in services and, to a somewhat lesser extent, in industry, retail trade and construction. Meanwhile, price expectations among consumers remained virtually unchanged.

While the first quarter will not see a sudden revival of growth, signs of recovery are becoming more apparent, which means that the manufacturing recession that the eurozone is currently in can be expected to end in the months ahead, Bert Colijn, an economist at ING said.

That should lead to a subdued uptick in growth, even though downside risks to the growth outlook like the coronavirus could prolong the sluggish eurozone growth environment a bit more, he noted.