European confidence in the economic outlook improved more than economists forecast to the highest in three and a half years in February, led by surging optimism in Germany.
An index of executive and consumer sentiment in the euro region advanced to 107.8 from 106.8 in January, the European Commission in Brussels said today. That’s the highest since August 2007. Economists had forecast a February reading of 106.8, the median of 28 estimates in a Bloomberg survey showed. A gauge of German economic confidence rose to 116.8 from 115.5.
The euro-area economy is showing signs of gathering strength after expanding less than economists forecast in the fourth quarter. German business confidence jumped to a record this month and the region’s services and manufacturing growth accelerated. BASF, the world’s largest chemical company, said today that it is “optimistic” about this year.
“Confidence indicators have continued to surprise on the upside and the region’s recovery remains very much on track,” said Simon Barry, chief economist at Ulster Bank in Dublin. “There’s still uncertainty, but we ended 2010 with some reasonable momentum and indicators have continued to build on that.”
A gauge of sentiment among euro-region manufacturers rose to 6.5 this month from 6.1 in January, today’s report showed. Services confidence jumped to 11.1 from 9.9 and an index of consumer confidence advanced to minus 10 from minus 11.2. Sentiment among builders rose to minus 24.3 from minus 26.
Economic confidence also improved in Spain and the Netherlands while declining in France, Italy and Belgium.
Investor confidence
The German economy, Europe’s largest, may continue to drive the region’s expansion this year after unusually cold temperatures sparked a construction slump in the fourth quarter and eroded economic growth. German investor confidence rose in February and output accelerated. Unemployment dropped to the lowest in almost two decades last month.
Infineon Technologies, Europe’s second-biggest chipmaker, on February 17 forecast higher full-year sales. Chief Executive Officer Peter Bauer said on that day that the company is “firing on all cylinders” and that the “volume of orders is excellent.” PPR, the French owner of Gucci, the same day reported 2010 profit that beat analysts’ estimates on surging fourth-quarter sales.
Faster-growing Asian economies have helped spur companies’ orders as governments from Greece to Ireland toughened austerity measures. The International Monetary Fund last month forecast China’s economy will grow 9.6 per cent this year with India expanding 8.4 per cent. The euro region may grow 1.5 per cent.
‘Major boon’
BASF said today that fourth-quarter profit more than doubled, beating analysts’ estimates. The Ludwigshafen, Germany-based company is “optimistic for the first quarter and the year as a whole,” CEO Juergen Hambrecht said in a statement.
“Euro-zone manufacturers will be hoping that global growth holds up well in 2011 and that the euro trades at a relatively competitive level,” said Howard Archer, chief European economist at IHS Global Insight in London.
