Eurozone Confidence Hits Postcrisis High

By Paul Hannon Features Dow Jones Newswires

Eurozone businesses and consumers grew more upbeat about their prospects in April, as a measure of confidence rose to its highest level since a year before the global financial crisis struck in 2008.

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The pickup in sentiment is consistent with the results of other recent surveys and other data, which suggest the eurozone's economic recovery has gained fresh momentum in early 2017.

Policy makers at the European Central Bank have cited the pickup in confidence among households and businesses as a reason for their more optimistic view of the currency area's economic prospects. However, policy makers are expected to confirm later Thursday that they will stick with their stimulus programs until there are clear signs that inflation will rise to their target and stay there.

The European Commission said its Economic Sentiment Indicator, which aggregates business and consumer confidence, rose to 109.6 in April from 108.0 in March, reaching its highest level since August 2007.

Among businesses, manufacturers were at their most upbeat since June 2011, while the measure for service providers rose to 14.2 from 12.8 in March, reaching its highest point since October 2007, almost a year before the collapse of Lehman Brothers.

The pickup in sentiment is a positive for the eurozone's growth prospects, since more confident businesses tend to invest and hire more freely. The commission found that manufacturers expect to raise their investment spending by 5% this year, up from the 3% projected when they were last questioned on the subject in November.

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Many economists had expected sentiment to weaken this year, given the high levels of uncertainty created by a busy election schedule in which political parties hostile to the euro and the wider European Union looked set to gain ground, and possibly triumph.

However, March elections in the Netherlands saw Prime Minister Mark Rutte defeat anti-euro populist candidate Geert Wilders. The April survey was taken before centrist candidate Emmanuel Macron won the most votes in the first round of France's presidential election, ahead of Marine Le Pen, who opposes membership of the EU and the eurozone.

French manufacturers and consumers were undaunted by the possibility of a big political change, with the country's ESI rising to 106.3 from 105.1, its highest level since July 2011. The Dutch measure rose to its highest level since March 2011.

The rise in eurozone confidence follows the release last week of a measure of activity in the private sector, based on surveys of purchasing managers, which suggested the eurozone economy has accelerated this year.

Despite recent encouraging signs for the eurozone economy, policy makers at the ECB have been at pains to play down the prospect of a reconsideration of its stimulus policies soon. In December, the ECB extended its bond-buying program, also known as quantitative easing, until the end of the year from March, though it lowered the monthly value of purchases.

In a development likely to reinforce their caution, the commission's survey found that consumers expect prices to rise more slowly over the coming 12 months than they did in each of the previous three months of 2017.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

April 27, 2017 05:26 ET (09:26 GMT)