Euro area consumer sentiment index beat expectations in August, economy likely to grow 0.6 pct in Q3

In the past week, the results of many surveys have come above expectations. Today’s Commission business and consumer survey has also beaten projections. This survey usually provides the most reliable guide to economic growth in the currency bloc. Especially, the headline euro area economic sentiment index rose slightly more than expected to 111.9, the best reading in over a decade, owing to increased positivity in the industrial and services sectors.

On the contrary, the survey revealed a moderation in sentiment in the retail and construction sectors. The construction sector sentiment had reached a nine-year high in July. Moreover, the improvement in consumer sentiment back close to June’s sixteen-year high, flagged by the flash estimate, was affirmed. Country-wise, economic sentiment rebounded most notably in Italy to the best level in nearly two years and rose in France to a new-six-year high.

With respect to the labor market, the survey results witnessed companies in the industrial sector record increased hiring intentions. And although the contrary was true of services and construction, continued to hint at likely firming of the labor market. And even if there was also a mixed scenario with respect to price development, with selling price expectations rising in the industrial sector, down in retail and construction, and slightly changed among consumers, the relevant indices were in line with continuation of the recent trend of subdued albeit positive underlying inflation, stated Daiwa Capital Market Research.

However, with the headline confidence index hinting at another quarter of GDP growth of 0.6 percent in the third quarter, and other survey indices suggesting that orders are plentiful and ongoing firm expansion is widely expected, the ECB’s sentiment in the outlook – including with respect to inflation in the medium term, should be strengthened by today’s survey, added Daiwa Capital Market Research.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 17.2303, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 104.645. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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