Sep — MNI analysts survey — August Revised
lowest median highest from
————————————————————————
Econ Sentiment 103.2 99.5 101.0 101.6 102.3 101.8
Industry -2 -6 -5 -3 -3 -4
Services +8 na na na +7 —
Consumers -11 -13 -11 -11 -11 —
Retail -1 na na na -3 -4
Construction -26 na na na -29 —
————————————————————————
Business Climate: +0.77 na na na +0.72 +0.61
————————————————————————

FRANKFURT (MNI) – Economic sentiment in the Eurozone rose
unexpectedly in September for the fourth consecutive month, beating all
forecasts, while August’s figure was revised upwards, the European
Commission reported on Wednesday.

Since its one-off setback in May, the Commission’s sentiment
indicator has increased steadily and, at 103.2, it is now at its highest
level since the beginning of 2008.

The unexpected and broad-based improvement in economic morale
contrasts sharply with a number of indicators that have tumbled
recently, and suggests that the looming slowdown could come later than
most analysts expect.

Among the larger Eurozone states, the most significant jump was in
Germany (+2.0), which contributed the most to the overall gain.
Increases were also recorded in Spain (+1.1) and in the Netherlands
(+0.9), while France remained nearly unchanged (+0.1). Conversely, Italy
continued to lose ground (-1.2).

In industry, modest improvements in forward-looking indicators like
production expectations (+1), order books (+2) and employment
expectations (+2) helped to lift the overall industry sentiment
indicator for the third consecutive month to -2.

In contrast, manufacturers polled in Markit Economics’ latest
purchasing managers index reported slower expansion in new orders and
output, leaving the September factory PMI at its lowest level in seven
months.

“Although the (PMI) survey suggests that GDP will have risen by
around 0.6% for the third quarter as a whole, slipping from 1.0% in the
second quarter, the weak September reading sets the scene for a further
slowing in the final quarter of the year to a pace more in the region of
0.3%,” said Markit chief economist Chris Williamson.

Meanwhile, the Commission’s separate business sentiment indicator
also showed significant gains this month, rising to its highest level
since December 2007 (see below).

For the fourth month in a row, morale in the services sector has
increased, reaching +8 on the month in September. As in industry,
improvements in the forward-looking components of the indicator, such as
evolution of demand expected (+2) and employment outlook (+3) more than
offset weakness in other components.

However, according to the most recent PMI, output growth in the
services sector decelerated in September, according to Markit. The
services PMI fell to a seven-month low in September, though confidence
in the one-year outlook rose to a five-month high.

The Commission’s financial services sentiment indicator, while not
a part of the overall ESI figure, lost ground in September, in line with
slide in the Sentix Eurozone investment morale indicator reported
earlier this month. As a result, the financial services figure fell one
point to 22 in September. However, the number remains above the long-run
average of 17 points.

As expected, consumer morale remained relatively unchanged this
month, still above its long-run average.

Households polled reported weakening confidence in the general
economic situation over the next year (-2). However, the employment
outlook over the next 12 months showed some improvement (+3), with
jobless fears falling to their lowest level since July 2008.

While consumer sentiment stagnated, retail morale continued to
strengthen, reaching its highest level since April. Retailers reported a
better current business situation (+2), as well as a marked improvement
in the business outlook (+5).

As a result, both their intention to place orders (+5) and the
employment outlook (+2) rose above the respective long-run averages,
while selling-price expectations rebounded (+3).

Construction morale also improved in September, rising three points
after stagnating in August. The gain in employment expectations (+6)
more than offset worsening order books (-1) and a declining activity
trend (-6).

The Commission’s business sentiment indicator jumped to +0.77 in
September from August’s +0.72 print.

“The level of the indicator suggests that economic activity in
industry will continue to recover in the coming months,” the Commission
said.

Citing business managers, the Commission noted growing optimism
regarding production and employment, as well as order book levels and
foreign demand levels.

— Frankfurt bureau; +49-69-720 142; email: frankfurt@marketnews.com —

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