BRUSSELS — Confidence in the eurozone’s economy strengthened in January for the first time since early 2011, European Union (EU) data showed yesterday, but a recovery in Germany masked a deterioration in France and Italy in a sign of the bloc’s diverging fortunes.
The European Commission’s economic sentiment indicator rose by 0,6 points in the eurozone to 93,4, the first improvement in sentiment since March last year as some confidence returned to services, consumers and construction.
The indicator was still slightly lower than forecast by economists polled by Reuters, underscoring the difficulty of measuring the rising optimism that is still tempered by EU leaders’ inability to resolve the eurozone debt crisis.
The business climate indicator also rose for the second month in a row to -0,21, in line with economists’ expectations.
The mixed picture was evident in the Commission’s industrial confidence indicator, which remained unchanged in January, as factory managers said they saw a deterioration in their assessment of their order books, though this was offset by a positive assessment of their stocks.
Confidence in services, meanwhile, rebounded by 2 points in the eurozone and construction also rose 0,6.
Economists are divided over how deep the eurozone’s economic contraction will be after the European Central Bank’s decision in December to provide 3-year loans to banks averted a credit freeze.
But budget austerity and political divisions over how to solve the two-year debt crisis continue to depress business in the eurozone and the wider European Union, with non-eurozone country Britain heading for a recession in early 2011.
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The European Commission forecasts 2012 economic growth of just 0,5% for the 17 nations in the eurozone, which generates 16% of global economic output.
The International Monetary Fund is more pessimistic, forecasting a 0,5% contraction in 2012 that it says could drag the world into recession.
EU leaders hope to sketch a pathway out of the slump at a summit in Brussels yesterday, but a big divergence in the performance of the 27-nation bloc’s economies makes that a tough task, while spending cuts are still the order of the day.
Recent data suggests Germany will avoid a recession, while non-eurozone member Britain, as well as euro states Spain, Italy, Greece and Portugal, are likely to see their economies contract in 2012. Belgium and the Netherlands, also members of the single currency, will struggle to grow at all.
