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Euro zone confidence continues up the ladder

Fri, Nov 27 2009, 10:53 GMT
by ecPulse.com analysis team

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Confidence levels around the euro zone continues to improve which is what the European Central Bank (ECB) President, Jean-Claude Trichet, was projecting especially as the 16-nation region is showing increasing signs of recovery while the zone expanded by 0.4 percent in the third quarter.

The euro zone business climate indicator rose to -1.56 from revised prior -1.79 from -1.78 which is higher than the forecasted -1.65. Consumer confidence for November improved to -17 which is better than the prior -18 inline with expectations. 

Economic confidence rose to 88.8 from revised 86.1 from 86.2, higher than the expected reading of 88.0, this reading marked the highest level since September 2008. As consumers have higher confidence in the euro zone outlook is a good sign for the economy, since this might mean higher spending because consumers usually tend to spend when they are confident with the outlook. 

Consumption is curtailed in the nation as a result of high unemployment rates that currently stand at 9.7%; the fragile job market means consumers pockets are squeezed, therefore they are forced to save in order to face worst economic times. 

The industrial confidence improved to -19 from October's -21 and unchanged from the projected reading. In other news, services confidence improved to -4 from -7 which is higher than the predicted -6.  

The ECB has lowered their interest rates to the lowest on record at 1% while turned to unorthodox measures as they bought bonds worth 60 billion euros in ways to stimulate lending in the banking system which would increase investments and consumption. 

The program was the reason behind the euro zone expanding in the third quarter as they contracted in the second quarter by 0.2 percent after the severe first quarter contraction of 2.5%, which was the worst quarter since 1995. 

During this month, Jean-Claude Trichet once again stated that the central bank is going to exit the stimulus plans gradually before it arouses inflation on the long run, which is a factor now that worries other major economies around the world. Although they are planning to end the stimulus programs, the ECB is not yet ready to increase interest rates. 

The European stocks yesterday shed massive points marking the most decline in seven months on worries that Dubai World, one of the major government-owned investment companies in Dubai, delaying debt for another six months, might cause the largest sovereign default since Argentina in 2001.   

The stock markets currently extend their decline while as of 10:13 GMT the DJ Euro Stoxx 50 dip 9.18 points or 0.33% to 2790.26 points, CAC 40 fell 2.71 or 0.07% to 3676.53 points while the DAX shed 5.66 points or 0.10% to 5608.70 points.

Published on  Fri, Nov 27 2009, 10:55 GMT

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