RTTNews - Eurozone economic sentiment improved for the second straight month in May after reaching a historical low in March, results of a closely watched survey showed Thursday.
The economic sentiment index rose to a six-month high of 69.3 in May from 67.2 in April, the European Commission's monthly survey revealed. The reading stood above the expected level of 69.
The increase in the confidence index was driven by a clear improvement in sentiment in the retail sector which rose markedly to minus 15 from minus 20 in April. Meanwhile, confidence in industrial and services sectors rose by a single point each to minus 34 and minus 23, respectively. Economists were looking for a minus 33 reading for industrial confidence, while services sentiment matched expectations.
At the same time, consumer confidence remained unchanged at minus 31 in May. The consensus forecast was minus 30. Sentiment in the construction sector also stood stable at minus 34.
Economic sentiment in the EU climbed for the second month in a row to 66.7 from April's 63.9. Most of the member states recorded an improvement in overall economic sentiment in May. Among the large members, Italy witnessed a 5.3 points rise, while it rose 4.8 points in the UK. The reading rose 1.5 in France and 0.9 points in Germany. Spain, on the other hand, registered a slight decrease of 0.9 points.
The financial services confidence indicator which is not included in the ESI remained stable in the euro area. The underlying components of the indicator showed a mixed picture.
A separate survey from the European Commission revealed that business confidence in the euro area rose slightly to minus 3.17 in May from minus 3.26 last month. Economists were expecting a reading of minus 3.1.
The indicator however remained at a very low level, signaling that annual change in industrial production may possibly be negative in April and would remain distinctly subdued in May.
All the underlying components of business confidence, except those related to order books improved in May. Managers' production expectations and view of the production trend continued to pick up. Managers' assessment of stocks of finished goods also improved from the last month level.
Commerzbank analyst, Christoph Weil said there is little change in the poor rating of the current situation and the present level of the ESI points to a slight contraction this spring.
The situation will bottom out in autumn, Weil said. By the time rate cuts and various economic packages initiated by the government will have a stabilizing effect, the analyst added.
He expects economic sentiment to continue its rising trend, making the markets more optimistic. Regarding business confidence, Weil said a further slight improvement is not an evidence of imminent, sustained upswing, and the outlook for next year remains modest.
Further, Weil added that the European Central Bank will remain under pressure to stimulate lending. But there is no talk of another rate cut at present.
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