Euro zone economic sentiment rises in January to seven-month high

Euro zone economic sentiment rises in January to seven-month high

BRUSSELS (Reuters) – Euro zone economic sentiment rose to a seven-month high in January on more optimism across all sectors except construction, with inflation expectations among consumers and companies both sharply down, data showed on Monday.

The European Commissions Economic Sentiment Index (ESI) rose to 99.9 this month, above an upwardly revised 97.1 in December — the highest value of the index since June 2022.

The rising optimism underlines expectations that an expected economic downturn in the 20 countries sharing the euro, if there is one at all, is likely to be shallow, despite the energy price and cost of living crises and the war in Ukraine.

The monthly Commission survey showed inflation expectations among consumers falling to 17.7 in January from 23.2 in December, well below the long-term average of 20.0, a trend that is likely to please the European Central Bank which has been raising interest rates sharply to curb surging inflation.

Selling price expectations among manufacturers also dropped sharply to 31.9 in January from 37.8 in December in a sign inflationary pressures early in the pipeline were receding too.

The Commission said optimism in industry rose to 1.3 from -0.6 in December and in services to 10.7 from 7.7. The mood among consumers improved to -20.9 in January from -22.1 and in the retail sector to -0.8 from -2.7.