Eurozone Consumer Confidence at 16-Year High
October 23 2017 - 11:06AM
Dow Jones News
By Paul Hannon
Eurozone consumers continued to gain confidence in October,
which should reassure European Central Bank policy makers that the
economic recovery is set to remain robust as they prepare to take a
key decision on the future of their bond-buying program.
On Monday, the European Commission said its monthly measure of
sentiment rose to minus 1.0 from minus 1.2 in September, its
highest level since April 2001.
The steady rise in confidence over the last 12 months has been
driven by greater optimism about the outlook for the eurozone
economy, which has experienced a tumultuous decade as first the
global financial crisis and then the currency area's debt troubles
caused two periods of contraction.
The eurozone economy has been growing since mid-2013 and the
pace of its recovery has picked up in 2017. To policy makers at the
eurozone's central bank, that suggests they can safely withdraw
some of the stimulus they have been providing over recent years.
The ECB's 25-member governing council is expected to announce
Thursday that it will reduce the amount of bonds it buys from
January.
"With the recovery well on track, a reduction of the ECB's
monthly asset purchases seems to be a foregone conclusion," said
Oliver Rakau, an analyst at Oxford Economics.
ECB watchers believe that will mark the start of a process that
will bring an end to bond purchases in 2018 and a rise in the key
interest rate by the end of this decade. Oxford Economics expects
the first rise in the deposit rate--which stands at minus 0.4%--at
the start of 2019.
The strengthening of sentiment suggests consumers have taken
that prospect in their stride and are confident the recovery can
survive a reduction in support from the ECB. That confidence in
turn aids the recovery, since more upbeat consumers tend to spend
more freely.
As in previous months, eurozone consumers appear to be
untroubled by higher levels of political uncertainty. German
elections held in September saw the nationalist Alternative for
Germany party win nearly 13% of the vote and a place in parliament
for the first time. In Spain, leaders of wealthy Catalonia are
pushing for independence.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
October 23, 2017 10:51 ET (14:51 GMT)
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