Euro area business and consumer sentiment index rises surprisingly above expectations in October

The latest Commission business and consumer survey shows that the euro area’s economic growth momentum in the euro area is very robust. The headline euro area economic sentiment index unexpectedly rose above expectations to 114 in October, the highest since January 2001 and a level in line with an annual rate of growth in excess of 3 percent year-on-year. The Commission survey detail was in line with a very widespread growth, with good news to report from nearly every sector. Especially, owing to a rise in new orders, sentiment in the industrial sector maintained the stable uptrend in place since late 2016 to rise to the highest level on the series.

Construction confidence also rose sharply to a ten-year high, likewise due to improved new orders. The services index also rose to reach its best level since late 2007. Meanwhile, the retail confidence recorded a sizeable gain for the second straight month to reach the highest since late 2015, while the 16-year high in consumer sentiment noted in the flash release was confirmed as well.

Amongst other detail, employment plans were upwardly revised in all business sectors, especially in industry and construction.  However, the indices are believed to have slightly exaggerated the strength of GDP. That is also expected to have been the case in the third quarter.

“We expect the flash estimate of euro area GDP last quarter, due tomorrow, to show a slight moderation of about 0.1ppt from the 0.65 percent Q/Q rate in Q2 to take the annual rate up just 0.1ppt to 2.4 percent Y/Y”, stated Daiwa Capital Markets Research.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bearish at -114.682, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 94.4822. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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