Economic optimism in the eurozone despite political uncertainty

ADVERTISEMENT

Economic sentiment in the eurozone was much better than expected in December thanks to more optimism in France, Germany and the Netherlands.

The European Commission’s monthly survey showed economic sentiment and the business climate indicator at their highest since March and June 2011 respectively.

It matched strong data this week from purchasing managers and signs of an uptick in inflation.

That suggests vibrant business activity in the eurozone at the turn of the year despite increased political uncertainties.

“The eurozone has started the year on a positive note,” ING economist Bert Colijn said, adding that Italy’s referendum last month and the subsequent concerns about its banking sector had not dented confidence in the currency bloc as a whole.

“Improving order books, strong employment expectations and strengthening assessments of production in recent months outweigh increased political volatility for the moment,” Colijn added.

German industrial orders

At the same time information about industrial orders in Germany was released showing a fall in November but strongly upward revision for October.

Contracts for ‘Made in Germany’ goods were down 2.5 percent on the month, the Economy Ministry said. That was slightly weaker than the consensus forecast of a fall of 2.3 percent.

But revised figures showed orders had surged 5.0 percent in October, meaning that over the two months, bookings rose by 3.5 percent, with industrial orders from countries outside the euro zone jumping 6.4 percent.

The Economy Ministry said the results together pointed to “a very favourable development” in the final quarter and that the expected upswing in the industrial sector was likely to carry into the first quarter of 2017.

German #manufacturing orders excluding volatile big tickets still on second highest level ever, despite decline in Nov pic.twitter.com/vxF8GdgLEe

— Holger Sandte (@HolgerSandte) January 6, 2017