Euro-area economic confidence at highest level in a decade

Euro-area economic confidence jumped to the highest level in a decade as the European Central Bank edged toward unwinding unprecedented stimulus.

An index of executive and consumer sentiment rose to 111.1 in June from 109.2 in May, the European Commission in Brussels said Thursday. The reading is the strongest since August 2007 and compares with a median estimate of 109.5 in a Bloomberg survey of economists.

The report comes two days after ECB president Mario Draghi confounded investors by arguing that there's room to adjust stimulus measures as the economy improves, even though he called for prudence and patience amid still-low inflation. A gauge for private-sector activity signalled the euro-area economy recorded its fastest expansion in six years in the second quarter as business confidence in Germany hit a record and consumer sentiment in France surged.

"The data are improving, the recovery is improving - we see the pieces are falling into place," said Marco Valli, an economist at UniCredit in Milan.

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Price pressure

“Price pressure will follow suit, sooner or later. This gives the ECB confidence to start talking about withdrawing accommodation although, especially after the market reaction this week, they will want to be very gradual.”

The commission’s report showed a broad-based improvement in sentiment.

Industry confidence was fuelled by managers’ more positive assessment of their order books and in services, optimism was bolstered by demand expectations. The increase in consumer sentiment reflected a better assessment of economic prospects, future unemployment and savings expectations.

Gauges for Germany, France and the Netherlands rose strongly, the commission said. A measure for Spain was up slightly, while confidence in Italy remained unchanged.

– (Bloomberg)