Despite data pointing to the global recession tightening its grip on the European economy, a series of forward-looking sentiment surveys indicate cautious optimism is emerging about prospects for the end of the year.
In a major test of the mood in the 16-member eurozone, German business confidence hit a five-month high in April, a key survey released on Friday showed, adding to hopes of pickup in Europe’s biggest economy as it heads into 2010.
The Ifo assessment followed publication of surveys showing a pickup in the mood of industry in France and Belgium. The surveys are seen by economists as a bellwether of economic sentiment in the 16-member economy built around the euro.
”The eurozone seems to have started this year in very bad shape,” said Jennifer McKeown, an economist with Capital Economics research group.
”But the rate of contraction should slow markedly as the year goes on and there is hope that the economy will begin to expand again next year,” she said.
The release of the surveys coincided with a stronger-than-forecast rise in the currency bloc’s purchasing managers’ index (PMI), with talk of better economic times ahead also emerging from the world’s two powerhouse economies — the United States and China.
”The improvement in the PMI in April confirms our belief that the fall in eurozone second-quarter GDP will be considerably less steep than in the past two quarters and will likely encourage talk of green shoots of recovery,” said ING bank economist Martin van Vliet.
At the same time, the European Commission’s closely watched eurozone economic sentiment survey to be released next week is forecast to edge up from 64,6 points in March to 65 points in April.
While again slashing its global economic forecasts this week, the International Monetary Fund said amid the gloom it had also detected ”tentative indications” of optimism from around the world.
In particular, the slew of stimulus fiscal packages unveiled by national governments combined with hefty interest rate cuts have helped to raise expectations that an economic pickup could slowly begin to take shape by the end of the year.
Another key German economic sentiment survey released this week showed that investor confidence surged in April to near a two-year high on the back of cautious optimism about Germany’s economic outlook, and more positive news out of the crisis-hit world financial sector.
Figures released on Friday also showed French consumer spending chalking up a larger-than-predicted increase in March on the back of dwindling inflation and government steps to encourage consumption in the eurozone’s second biggest economy.
The improvement in economic sentiment in the eurozone could help the hawks on the European Central Bank’s governing council to argue that next month’s forecast reduction in borrowing costs should mark the end the bank’s current-rate setting cycle.
But the economic sentiment surveys stand in stark contrast to the steady stream of often horrendous economic data published from around the world.
The British economy shrunk by its fastest rate in 30 years during the first quarter, the nation’s statistics office said Friday, contracting by 1,9% following a 1,6% slump in the last three months of 2008.
Eurozone industrial new orders posted a smaller-than-expected monthly fall in February, but plunged by a record 34,5% compared to the same month last year, European Union statistics said this week.
Leading economic forecasters also predicted this week that Germany faced a dramatic 6% contraction in its economy this year with the steep economic slide rolling through into 2010 and triggering a big jump in unemployment, This underscores the growing risk that the economic crisis, which was triggered by a meltdown in the US banking sector, was rapidly transforming itself into a labour market crisis as companies lay off workers following slumping production and shrinking order books. — Sapa-dpa