Eurozone Manufacturing Confidence Hits Record High

Eurozone manufacturers are more optimistic about their prospects than at any time since the sentiment in the sector was first measured in 1985, a sign that the currency area's faster economic expansion is set to continue over coming months.

The European Commission on Monday said its Economic Sentiment Indicator, which aggregates business and consumer confidence, rose to 116.0 in December from 114.6 in November to reach its highest level since October 2000. Economists surveyed by The Wall Street Journal had expected a much smaller rise to 114.8.

The surprise was driven by the measure of industrial confidence, which rose to 9.1 from 8.1, reaching a level not seen in more than three decades of polling. A separate measure of conditions facing manufacturers, the Business Climate Indicator, also hit a series high.

The rise in confidence was a response to signs of stronger demand from customers, and manufacturers say they will respond with the most aggressive hiring in three decades. That bodes well for an economy that still suffers from very high rates of unemployment by the standards of other developed economies such as the U.S.

The surge in confidence also spread to service providers, retailers and construction companies, and comes at the end of a year in which the eurozone economy performed much better than had been expected.

Consumer confidence has also improved, reaching its highest level since the start of 2001. More-confident businesses tend to invest more, while optimistic households spend more freely. Figures also released Monday showed retail sales in the eurozone were 1.5% higher in November than October, although they fell almost as sharply in that earlier month.

Business and consumer sentiment has continued to strengthen despite high levels of political uncertainty. Germany--the eurozone's largest member--still lacks a government following elections in September, while Italy faces a March poll in which the antiestablishment 5 Star Movement could emerge as the largest single party.

Write to Paul Hanon at paul.hanon@wsj.com

(END) Dow Jones Newswires

January 08, 2018 05:18 ET (10:18 GMT)