By Paul Hannon

 

The surge in optimism among eurozone consumers that helped make 2017 a banner year for the currency area's economy has continued into 2018, a sign that growth is likely to remain strong over coming months.

The European Commission on Tuesday said its monthly measure of sentiment rose to 1.3 in January from 0.5 in December, reaching its highest level since August 2000. Economists surveyed by The Wall Street Journal last week had anticipated a much more modest rise to 0.6.

Business surveys and official data suggest the eurozone economy grew by around 2.4% in 2017, the fastest rate in a decade. And economists increasingly expect 2018 to come close to matching that performance. The International Monetary Fund on Monday raised its growth forecast for the year to 2.2% from 1.9% in October.

More upbeat consumers have helped drive that pickup in growth, since households tend to spend more freely when they aren't pessimistic about their prospects. The rise in optimism likely reflects a gradual but significant decline in unemployment since the start of the recovery in late 2013.

The January rise in confidence suggests consumers are no more sensitive to political uncertainties than they were in 2017, when they shrugged off elections in the Netherlands, France, Germany and Austria. The next big vote will take place in Italy in March, and opinion polls suggest it will produce a hung parliament that will struggle to form a strong, stable government capable of rebooting the troubled economy.

The strength of confidence will likely reassure policy makers at the European Central Bank that they have made the right decision in cutting their monthly bond purchases from January, and if sustained could increase their willingness to move more quickly to remove the stimulus they have provided since the financial crisis.

 

Write to Paul Hannon at Paul.Hannon@wsj.com

 

(END) Dow Jones Newswires

January 23, 2018 10:43 ET (15:43 GMT)

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