Euro zone sentiment improves

Morale in the euro zone's economy improved for the first time in almost a year in November, but signs of stagnant investment plans for next year in industry dampened hope of a quick recovery from recession.

Economic sentiment in the euro zone rose 1.4 points to 85.7, ending an eight-month run of falls, the European Commission's monthly business and consumer survey showed today, beating forecasts.

However, the Commission's survey of industry found expectations of a 1 per cent fall in real investment in 2013 compared to this year, casting doubt on optimism among European policymakers that growth will return next year.

The euro zone fell into a recession in July-September, its second since the global financial crisis in 2009, as French resilience could not make up for a slump across Europe and the three-year debt crisis slowed Germany to a crawl.

The Commission sees 0.1 per cent growth in the euro zone economy next year, but the OECD and many international economists see the recession continuing in 2013.

"We expect the euro area to remain in recession in 2013," Citigroup said in a research note this week, predicting more interest rate cuts by the European Central Bank to try to stimulate the economy, which generates a fifth of global output.

Still, economic sentiment in November was better than the decline expected by economists polled by Reuters and the Commission said confidence in industry increased significantly by the first time since February, helped by orders.

That may be a sign that the euro zone, while struggling at home with the debt crisis, may be benefiting abroad as the US and Chinese economies regain some strength.

Reuters