Euro area economic sentiment rises further in December, private consumption growth to have rebounded

The economic sentiment for euro area continues to be strong. In line with the December PMIs released recently, the European Commission economic confidence indicators released today showed improved sentiment in all major sectors of the economy in December. The headline ESI rose by 1.4 points to 116, the highest since 2000. The average for the fourth quarter came in at 114.9, which is up almost 3 points from the earlier quarter. This hints at an evident rise in economic growth from the third quarter’s growth of 0.6 percent on a sequential basis, stated Daiwa Capital Markets Research in a report.

Looking into the details, all major sub-indicators added to the rebound of the headline figure. For instance, the confidence index for industry rose to a new series high, while the equivalent index for services rose to the highest in decade. Moreover, there were no hints of softness in other detail, with the survey recording further improvement in employment and demand expectations in both manufacturing and services, hinting that momentum is expected to be maintained in the months ahead, stated Daiwa Capital Markets Research.

Meanwhile, households were upbeat too, with the final consumer sentiment estimate confirming the flash figure of a rise of 0.5 points to 0.5, a 16-year high. With all the sentiment indicators pointing in the same direction, it would be unusual to witness the hard activity indicators moving the opposite way. After the disappointing euro area retail sales in October, today’s figures saw a rebound of 1.5 percent sequential rise in November. Both food and non-food categories indicated very notable rises, with the latter driven by a sharp rise of 5.9 percent in textiles, footwear and clothing.

“Given the strength of the Commission survey, December seems unlikely to be any weaker, suggesting that private consumption growth is likely to have picked up in Q4 from 0.3 percentQ/Q in Q3, which was the slowest in four quarters”, added Daiwa Capital Markets Research.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bearish at -174.097, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 18.2408. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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