Upbeat mood in euro area

EUROPEAN CONFIDENCE in the economic outlook remained close to its highest in more than three years in January as manufacturers became more optimistic.

An index of executive and consumer sentiment in the euro area slipped to 106.5 from a revised 106.6 in December, according to a European Commission survey. The December reading was the highest since September 2007. Economists had forecast a gain to 106.7, according to a Bloomberg survey.

Europe’s economic growth has been powered by German companies boosting output and spending to meet export orders as countries from Spain to Greece trimmed their budget deficits. Europe’s services and manufacturing growth accelerated in January and German business confidence surged to a record.

“If heavyweights like Germany are doing well, it’s compensating for a lot of negative news,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “The crisis mainly affected peripheral states. I’m happy with the current economic performance; it’s a stable development overall.”

In the US economy, the world’s largest, confidence among consumers rose more than forecast in January to the highest level in eight months. The New York-based Conference Board’s gauge for the economic outlook for the next three to six months also exceeded forecasts in December.

European companies have relied on faster-growing markets as governments toughened austerity measures to push down budget deficits and restore confidence in the currency union. JPMorgan Chase chief executive Jamie Dimon said during a panel discussion at the World Economic Forum in Davos yesterday that the EU is the “only good choice to get through the crisis”.

Still, households grew more pessimistic about their financial situation over the coming 12 months, according to the commission. A gauge measuring consumer expectations in unemployment fell to 19.9 from 21.3 in December and a sub- indicator measuring households’ assessment of price developments over the coming year jumped to 20.9 from 15.1. – (Bloomberg)