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Euro-Area Consumer Confidence Rises to Highest in 22 Months

Euro-area consumer confidence increased more than economists forecast in June, jumping to the highest in 22 months and adding to signs the economy is starting to emerge from a record-long recession.

An index of household confidence in the 17-nation euro zone rose to minus 18.8 this month from minus 21.9 in May, the European Commission in Brussels said today. Economists had forecast an increase to minus 21.5, according to the median of 26 estimates in a Bloomberg News survey. It was the seventh consecutive increase and the biggest nominal jump since July 2010.

The euro area’s 18-month recession will end in the second quarter as the economy stagnates before growing 0.1 percent in the following three months, according to a separate Bloomberg survey of economists. Still, the European Central Bank lowered its outlook for currency bloc this month and now forecasts a 0.6 percent contraction this year before growth of 1.1 percent in 2014.

“Despite June’s very decent increase, confidence is still limited compared to long-term norms,” said Howard Archer, chief U.K. and European economist at IHS Global Insight in London. “Euro-zone consumers continue to largely face high and rising unemployment, generally muted wage growth and tight fiscal policy.”

Euro-area unemployment has reached a record 12.2 percent, putting a damper on consumer spending. European car sales fell to a 20-year low in May and retail sales dropped for a third month in April, recent data showed.

Central Bank

Inflation has been below the ECB’s 2 percent ceiling since February. The Frankfurt-based central bank, which left its benchmark rate at a record low of 0.5 percent on June 6, sees inflation at 1.4 percent this year and 1.3 percent in 2014.

The economic climate will remain “quite tough” in Europe this year, Royal Ahold NV (AH) Chief Executive Officer Dick Boer said on June 4 after the company announced it will quadruple a share buyback. The Dutch owner of the Stop & Shop supermarket chain will continue to focus both on returning cash to shareholders and growth, Boer said on a conference call.

At the same time, euro-area services and factory output increased more than economists forecast in June, suggesting the economy gathered pace as the second quarter progressed. A composite index based on a survey of purchasing managers in both industries rose to 48.9, the highest in 15 months, London-based Markit Economics said today.

Store revenue of Inditex SA (ITX), owner of Zara, rose at a faster pace in the first five weeks of the second quarter at constant exchange rates than total sales did in the opening three months of the financial year, the company said on June 12.

The Brussels-based commission is scheduled to publish the final numbers for May consumer confidence and the wider indicator of euro-area economic confidence on June 27.

To contact the reporter on this story: Corina Ruhe in Amsterdam at cruhe@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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