Eurozone economic sentiment was much better than expected in December thanks to more optimism in France, Germany and the Netherlands and inflation expectations among consumers rose further, European Commission data showed on Friday. The Commission's monthly survey showed economic sentiment in the 19 countries sharing the euro rose to 107.8 in December from 106.6 in November, well above the long-term average of 100.
Economists polled by Reuters had expected an improvement in the sentiment only to 106.8.
Separately, the Commission's business climate indicator, which points to the phase of the business cycle, rose to 0.79, its highest level since June 2011 when it was 1.03. "Managers' assessments of the past production improved sharply, as did, to a lesser extent, their views on the future production, overall and export order books and the stocks of finished products," the Commission said.
All components of the economic sentiment indicator improved. Sentiment in industry jumped to 0.1 point from -1.1 in November, well above the long-term average of -6.5. Sentiment in the services sector, which produces two thirds of the euro zone's GDP, also rose to 12.9 in December from an upwardly revised 12.2 points in November, beating economists expectations of an improvement only to 12.2.
While producer price expectations in industry remained stable, consumer inflation expectations rose to 8.8 points in December from 6.3 in November and 4.3 in October. This is welcome news for the European Central Bank which has been buying billions of euros worth of eurozone government bonds on the market to inject more cash into the banking system and make banks lend more to the real economy to boost inflation closer to its target of below, but close to 2 percent.
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