Eurozone economic sentiment improves for second month

BRUSSELS – Economic confidence is up in the 19 European countries that use the euro, a survey showed Monday, thanks in particular to greater optimism among consumers that has led to a pickup in inflation expectations.

The Economic Sentiment Indicator, a monthly survey by the European Union’s executive Commission, rose to a four-month high of 104.7 points in May from 104.0 in April.

Consumers expressed greater confidence over the general future of the eurozone economy, the prospects for employment as well as savings. Industry managers also sounded more upbeat, in particular about a rise in orders.

Among the eurozone’s biggest countries, France saw the strongest rise in confidence, with Germany enjoying a smaller uptick.

The industry and retail sectors expressed a greater interest in hiring, a potential boon to a region still blighted by unemployment of around 10 per cent.

In a sign of confidence in consumer demand, companies were expecting to raise their selling prices, particularly in industry and services but also, to a lesser extent, in the retail and construction sectors.

That will be encouraging news for the European Central Bank, which has unleashed a series of monetary stimulus programs to raise consumer price inflation. At last measure, inflation was minus 0.2 per cent annually, far below the ECB’s 2 per cent target. Low inflation is a sign of a weak economy and can become ingrained, weighing on growth for years.

The ECB will meet this week to reassess its policies but is not expected to take any further action as it waits for its latest policies — including interest rate cuts and an increase to its bond-buying stimulus program — to take effect.