Euro-Area Consumer Confidence Improves More Than Forecast

Euro-area consumer confidence increased more than economists forecast in January, adding to signs that the currency bloc’s recovery is gathering momentum.

An index of household confidence in the euro area rose to minus 11.7 from minus 13.5 in December, the European Commission in Brussels said in a preliminary report today. That exceeds the median forecast of minus 13 in a Bloomberg News survey of 27 economists.

Positive economic signals are accumulating in the euro zone, with manufacturing output expanding more than forecast in January and retail sales up 1.4 percent in November from the previous month. European new-car sales surged the most in almost four years in December as price cuts by producers such as Renault SA and Ford Motor Co. (F) helped generate a recovery that industry executives say will last in 2014.

“This is good news because consumer spending is still lagging,” Martin van Vliet, an economist at ING Bank in Amsterdam, said by telephone. “This ties in with earlier PMI data to show the general mood is improving as the recovery gains traction.”

The euro extended gains against the dollar after the confidence data were released, trading at $1.3678 at 4:20 p.m. in Brussels, up slightly less than 1 percent on the day.

Market Rates

Yet while stocks and bonds have rallied in the euro zone, European Central Bank President Mario Draghi this month strengthened a pledge to keep interest rates low for as long as necessary. The economy is still struggling to grow amid subdued prices and the threat of rising market rates as the U.S. Federal Reserve tapers its monetary stimulus.

Economists see growth in the bloc’s economy accelerating to 0.2 percent in the fourth quarter after a 0.1 percent gain in the previous three months, according to a separate Bloomberg survey. Unemployment (UMRTEMU) stands at 12.1 percent.

Ford, the second-largest U.S. automaker, is monitoring European job numbers as it counts on more drivers replacing aging vehicles to boost sales. “The unknown is when the unemployment levels start to change, and that would be an accelerant,” Stephen Odell, president of Europe operations, said in an interview on Jan. 14.

In the U.S., consumer confidence was little changed last week at a one-month low as Americans confronted having to pay holiday bills.

The Bloomberg Consumer Comfort Index held at minus 31 for the period ended Jan. 19. A drop in the buying-climate gauge that sent it to a two-month low was offset by rebounding attitudes on the current state of the economy.

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

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

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