Euro Zone Economic Sentiment Beats Expectations, Rises For Sixth Straight Month; German Unemployment Rate Steady

 @AmruthaGayathri
on October 30 2013 7:40 AM
European Parliament
A statue depicting European unity is seen outside the European Parliament in Brussels on Sept. 5, 2013. Reuters

The economic sentiment indicator, or ESI, in the 17-member euro zone rose to 97.8 in October, beating expectations by 0.5 points and rising up from 96.9 in September to constitute its sixth straight increase and taking the index to its highest level since August 2011.

The rise in ESI “suggests that the region’s modest recovery continued in the early stages of Q4,” Ben May, European economist at Capital Economics, said in a note. “On past form, the ESI now points to annual GDP growth of almost 1%. This is consistent with further, albeit small, quarterly rises in GDP in Q3 and Q4 of about 0.2%.”

The gain in ESI stood in contrast to German business confidence in October, which defied analysts’ expectations to fall after rising for five consecutive months, according to Ifo Business Climate index released on Friday. And, data released on Wednesday by the German Statistics Office showed that Germany’s unemployment rate held steady at 6.9 percent in September, as expected, and, for the first time since reunification in 1990, the number of people who were employed crossed the 42 million mark to reach 42.1 million.

Back in the euro zone, industry confidence also registered an improvement in October, although the scale remained in negative territory. The index rose to -4.8 from -6.6 in September, above expectations of a marginal increase to a -6.5 reading. The consumer confidence index, which also continues to be in negative territory, rose to -14.5 in October, as expected, from -14.9 in September.

The business climate indicator also recorded gains and reached -0.01 in October, beating expectations of a -0.15 reading, and up from -0.19 in the previous month. The services sentiment index, however, missed expectations of an uptick to -2.8 and instead dropped to -3.7 in October, from a -3.2 reading in September.

“The breakdown showed that the pick-up was down to a rise in consumer and industrial sentiment, whereas service sector sentiment inched down,” May said. “Overall, another sign that the euro-zone has continued to grow, but we continue to think that the recovery will remain sluggish and that GDP growth will be weaker than the consensus expectation.”

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