European economic confidence climbs
News Article Date: Monday 29th of June 2009
European business and consumer confidence climbed for the third month in a row in June but still languished near its lowest point in two decades, the European Commission said Monday.
It said the main players in the economy "seem to be gaining confidence that the crisis is easing" as industrial and services companies expect to be employing more people in future and consumers are worrying less about losing their jobs.
EU officials warn against these apparent green shoots signaling an end to the recession, saying the pickup in confidence doesn't go beyond expectations and companies have not yet reported an increase in output.
More optimism among consumers, the services sector and industry pushed an indicator of economic sentiment to 73.3 in June from 70.2 in May in the 16 nations that use the euro, the EU executive said. Across the 27-nation European Union it rose to 71.1 from 67.9.
Despite the improvement, economists at Unicredit said this was still a "clearly recessionary" level.
The European Commission echoes this in a report on the euro economy saying that "the magnitude of the rebound remains relatively small" and hard data for the second quarter "are, at best, mixed" with an upturn for retail and construction outweighed by lower industrial output.
"There is still a long way to go from these green shoots to a solid recovery," the report said. "We should not be premature and think that the crisis is over. Economic activity remains depressed."
A separate EU survey of euro-zone industry managers indicated that it was too soon to call an end to the economic downturn. Manufacturers' forecast for orders hit new record lows, it said, warning that industrial output is likely to stay subdued in June after shrinking in May.
More consumers said they saw the overall economy and their personal finances getting better over the next year. They also said they were slightly more likely to make major purchases - such as a car or household goods - now and in the next 12 months.
But euro-zone consumers said they were not more willing to buy a house or carry out home improvements.
The EU's three largest economies - Germany, Britain and France - "recorded significant increases in sentiment," the EU said, with smaller hikes in Poland, Spain, the Netherlands and Italy.
The construction industry saw no major change in mood as the recession holds back the building of new homes and offices. Retailers in the euro-zone were more pessimistic than last month.
The financial services sector, not included in the overall economic sentiment survey, is also feeling more optimistic, the EU said, with managers saying they believed business has improved over the last three months.
The European Commission survey of confidence among the euro area's industry managers also rose, from minus 3.11 in May to minus 2.97 in June, but is still far below previous lows from 1993.
"This suggest that year-on-year industrial production growth will still have been negative in May and will remain subdued in June," it said.
Orders for goods both in Europe and for export "continued to worsen, reaching new record lows," the EU said. Managers are more optimistic than recent months, it said, as they see output increasing slightly because companies are starting to restock after a recent spending freeze.
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