Eurozone economy maintains strong momentum - ING
According to the Bert Colijn, Senior Economist at ING, businesses and consumers continued their bout of optimism in December as the Economic Sentiment Indicator for the Eurozone increased by 1.2 points to 107.8.
Key Quotes
“Retail sales in November also add to optimism as the growth of 2.3% YoY indicates that sales growth has increased in pace in the fourth quarter.”
“The Eurozone has started the year on a positive note, with sentiment at the highest level since 2010. The reading of 107.8 is well above long-term average, with sizable increases in confidence among consumers, industry and the service sector. The Italian referendum and subsequent concern about the Italian banking sector has not impacted confidence in the Eurozone and it caused a mere stagnation in sentiment in Italy itself. Improving order books, strong employment expectations and strengthening assessments of production in recent months outweigh increased political volatility for the moment.”
“Inflation is currently trending upwards as the oil price effect has run out, but also core price pressures are building. Businesses are indicating that they are now passing on higher input prices to the consumer as the ESI shows that businesses’ selling price expectations are increasing both in industry and services, although in services there was a slight downtick in the number of businesses indicating higher selling price expectations in December. The trend remains positive for both industry and services though. If this continues, core inflation could increase somewhat quicker over the coming months, although there is a lag between this survey indicator and price developments. It is therefore more likely to impact core inflation at the end of 2017, coincidentally the time when the current QE program is supposed to end.”
“Retail sales declined by -0.4% MoM in November but the trend in sales growth remains positive as annual growth is 2.3%. October growth was so strong that a small monthly decline was expected. Q4 as a whole will likely come in a lot stronger than Q3, which bodes well for consumption growth in the fourth quarter. This is unless December saw a strong decline in sales, but that seems unlikely judging from the high consumer confidence, improving unemployment rate and the gifts I received under the tree this year.”