Euro-Area Economic Confidence Increases More Than Estimated

Bloomberg: Economic confidence in the euro area increased more than economists forecast in February, adding to signs that the 17-nation currency bloc may be emerging from a recession.

An index of executive and consumer sentiment rose to 91.1 from a revised 89.5 in January, the European Commission in Brussels said today. Economists had forecast an increase to 89.9, according to the median of 29 estimates in a Bloomberg News survey. The commission’s index was conducted in the first two weeks of the month.

Today’s data indicate how sentiment was shaping up before an inconclusive election in Italy on Feb. 24-25 renewed market convulsions over Europe’s debt crisis as recession-scarred voters repudiated budget rigor. The euro fell toward a seven- week low versus the dollar before today’s release.

“Things have improved a little bit in the euro zone, but economic conditions are still extremely tough across the region,” said Jonathan Loynes, chief European economist atCapital Economics in London. “The Italy situation could renew these market pressures and reinforce the fact that the euro zone still faces huge pressures, both economic and political.”

The euro extended gains against the dollar after the data were released, trading at $1.3107 at 11:04 a.m. in Brussels. The Stoxx Europe 600 Index was little changed at 284.49.

Euro-Area Recession

The euro-area recession deepened in the fourth quarter, as the economy recorded its worst performance in four years with a contraction of 0.6 percent. Gross domestic product will decline again in the first three months before returning to growth in the second quarter, according to the median of 21 economists’ estimates in a separate Bloomberg survey.

A gauge of sentiment among European manufacturers improved to minus 11.2 from minus 13.8 in January, today’s report showed. An indicator of services confidence rose to minus 5.4 from minus 7.7. Consumer sentiment increased to minus 23.6.

While European Central Bank President President Mario Draghi said last week that the euro area should begin a “very gradual recovery” later this year, services and manufacturing data suggest the region’s economy continues to contract.

Weak demand from customers and poor investor confidence is denting companies’ profits in the region.

Anheuser-Busch InBev NV (ABI), the Leuven, Belgium-based beermaker, said today that own-beer volumes in Western Europe declined 3.5 percent last year, while total volumes fell 4.2 percent. In the fourth quarter, both indicators fell 3.8 percent.

CRH Plc (CRH), the world’s second-largest maker of construction materials, yesterday posted a 5 percent decline in full-year earnings, citing weak consumer demand in the euro region.

reporter on this story: Svenja O’Donnell in London