Eurozone Confidence at Highest in Nearly 2 Years, But Political Uncertainty Looms
January 23 2017 - 11:41AM
Dow Jones News
By Paul Hannon
European consumers continued to grow more optimistic in January,
ahead of key elections that could lead to major changes in economic
policy.
The European Commission on Monday said consumer confidence
across the 19 eurozone countries in January rose to -4.9--the
highest level since April 2015--from -5.1 in December.
The continued pickup in consumer confidence suggests the
eurozone's recovery could gain momentum in the early months of
2017.
Figures for growth in the final quarter of 2016 will be released
Jan. 31 and most analysts expect the data to show a slight
acceleration from the previous six months.
Consumer sentiment has been supported by a steady if slow
decline in the unemployment rate, as the eurozone economy expands
modestly. Morale may also have been boosted by the European Central
Bank's announcement in December that it would extend its
bond-buying stimulus program to the end of 2017.
"Consumers across the eurozone currently seem to be focusing on
recent, largely decent economic news and improved job markets and
for now at least, are brushing off political uncertainties," Howard
Archer, an economist at IHS Global Insight, said.
The pickup in sentiment could help boost the eurozone's
recovery, since upbeat consumers tend to spend more freely.
However, some economists worry consumption may be the economy's
weak spot in 2017, if a rise in inflation, driven by higher energy
prices, isn't matched by wage increases.
Consumers also face a great deal of uncertainty, with the
Netherlands, France and Germany each holding elections in 2017.
Victory for one, or a number of, nationalist parties could
resurrect questions about the eurozone's survival, since these
parties are hostile to the single currency and the wider European
Union.
Opinion polls suggest nationalist victories are unlikely, but
the Brexit vote in the U.K. and Donald Trump's triumph in the U.S.
mean political uncertainty remains high.
Europe's leading anti-immigrant and antiestablishment
politicians rallied in Germany's Rhineland on Saturday to launch an
election year push they hope will topple the EU, displaying a new
level of ambition and organization and casting Mr. Trump as their
inspiration.
"Looking ahead, inflation is set to rise sharply, which will cut
into real wage growth, while economic stability is endangered by
forthcoming popular votes," Daniel Christen, an analyst at Capital
Economics, said.
"We therefore expect confidence to weaken in the coming
months."
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
January 23, 2017 11:26 ET (16:26 GMT)
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