European Economic Confidence Climbs to Three-Year High on German Exports
A Daimler AG Mercedes Benz logo
Liesa Johannssen/Bloomberg
Europe’s economic recovery has held up in the face of tougher budget cuts as some of the region’s largest companies including carmaker Daimler AG benefited from demand in emerging markets.
Europe’s economic recovery has held up in the face of tougher budget cuts as some of the region’s largest companies including carmaker Daimler AG benefited from demand in emerging markets. Photographer: Liesa Johannssen/Bloomberg
Nov. 29 (Bloomberg) -- Julian Callow, chief European economist at Barclays Capital, talks about the 85 billion-euro ($113 billion) aid package given to Ireland in an attempt to quell market turmoil menacing the euro. He speaks with Maryam Nemazee on Bloomberg Television's "Countdown." (Source: Bloomberg)
European confidence in the economic outlook improved to the highest in three years in November as Germany’s export-driven growth helped counter concerns that a spreading sovereign-debt crisis will hurt the recovery.
An index of executive and consumer sentiment in the 16 euro nations rose to 105.3 from 103.8 in October, the European Commission in Brussels said in a statement today. That’s the highest since November 2007. Economists forecast a gain to 105, the median of 26 estimates in a Bloomberg News survey shows.
Europe’s economic recovery has held up in the face of tougher budget cuts as some of the region’s largest companies including carmaker Daimler AG benefited from demand in emerging markets. German business confidence rose to a record in November and European governments yesterday agreed on an 85 billion-euro ($113 billion) aid package for Ireland to quell market turmoil.
“Ireland is too small for a big economic impact,” said Carsten Brzeski, a senior economist at ING Group in Brussels. “While the export dynamic might weaken and peripheral countries will be hurt by austerity measures, the recovery remains robust in core countries.”
A gauge of sentiment among manufacturers rose to 0.9 from zero in the previous month, while services confidence increased to 10.2 from 8.1, today’s report showed. The index of consumer confidence advanced to minus 9.4 from minus 10.9 and sentiment among builders fell to minus 26.4 from minus 25.4.
The euro was little changed against the dollar after the report and was at $1.3214 as of 10:09 a.m. in London from $1.3213 yesterday.
Rising Stocks
The debt crisis has forced governments from Spain to Ireland to cut spending and increase taxes to push down budget deficits, raising concerns about the region’s economic outlook. European Central Bank council member Christian Noyer said in Tokyo today that the recovery remains “well on track” and the region isn’t facing a confidence crisis.
European stocks rose today, with the Stoxx Europe 600 Index gaining as much as 0.8 percent. The premium investors charge to hold Irish 10-year bonds over benchmark German bonds fell 10 basis points to 636 basis points. It reached a record 656 basis points on Nov. 26, almost triple the spread four months ago.
German exports are powering the region’s expansion, fueling earnings at companies including Porsche SE. The Stuttgart, Germany-based carmaker said on Nov. 24 that operating profit surged more than sevenfold in the quarter through October.
‘Confident’
European companies have relied on faster-growing economies to boost earnings as budget cuts eroded consumer demand at home. Daimler, the world’s second-largest maker of luxury cars, on Oct. 28 raised its full-year profit forecast after net income beat analysts’ estimates partly on increasing demand in China.
“The world economy is not yet as stable as it was before the recession, but we are confident that we will continue to operate successfully in our markets,” Daimler Chief Executive Officer Dieter Zetsche said on that day.
A gauge measuring manufacturers’ production expectations rose to 15.3 from 14, today’s report showed. An indicator of export order books increased to minus 10.6 from minus 13.1 and manufacturers also grew more confident about hiring. A gauge measuring manufacturers’ price expectations rose to 10.6 in November from 8.6 in October. The index of consumers’ price outlook also increased.
‘Soft Spot’
While the euro dropped against the dollar in the first half of the year as the Greek debt crisis undermined the currency, it’s gained 11 percent since falling to a four-year low in June, making exports less competitive abroad just as a global recovery weakens.
The Organization for Economic Cooperation and Development on Nov. 18 lowered its global growth forecast for next year to 4.2 percent from 4.5 percent and forecast a “soft spot.” The euro-region economy may grow 1.7 percent this year and next, lagging a U.S. expansion, the Paris-based group forecast.
Bulgari SpA, the world’s third-largest jeweler based in Rome, on Nov. 11 reported third-quarter profit that missed analysts’ estimates. Chief Executive Officer Francesco Trapani said that U.S. shoppers have become “much more cautious.”
The U.S. Federal Reserve on Nov. 3 decided to purchase $600 billion in Treasury securities to stimulate the world’s largest economy. In Europe, the ECB has bought government bonds and extended emergency liquidity for banks into 2011 to help restore investor confidence in the currency region.
The Frankfurt-based ECB will publish new economic forecasts for this year and next on Dec. 2 when council members meet for their monthly interest-rate meeting. The benchmark interest rate is currently at a record low 1 percent.
To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net
To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net
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