–Adds Comments On Consumer, Retail And Construction Sentiment

Feb — MNI analysts survey — Jan Revised from
lowest median highest
————————————————————————
Econ Sentiment 94.4 92.8 93.6 94.1 93.4 —
Industry -5.8 -7.5 -7.0 -6.5 -7.0 -7.2
Services -0.9 -1.0 -0.4 0.0 -0.7 -0.6
Consumers -20.3 na na na -20.7 —
Retail -14.3 na na na -15.5 —
Construction -24.5 na na na -28.1 -28.3
————————————————————————
Business Climate: -0.18 -0.20 -0.17 -0.15 -0.21 —

PARIS (MNI) – Economic morale in the Eurozone recovered more than
expected in February, led by a marked improvement in industry
expectations, the European Commission said Tuesday.

After a 0.6-point upturn in January, the Commission’s sentiment
index gained a full point in February to a four-month high of 94.4. Most
analysts had expected a more modest gain and some a slight decline.

Alongside the upturn in other leading indicators of late, this
suggests that the worst of the slump is over and that activity could
begin to expand again in 2Q. However, the slowdown in global economic
activity this year and the daunting consolidation efforts required in
the Eurozone point to an extended period of convalescence ahead.

Among the largest economies, sentiment improved in France (+1.6
points), the Netherlands (+1.2), Italy (+1.0) and Germany (+0.1).
Yet only in Germany is the index above average.

After disappointing in January, industry morale surpassed
expectations with a 1.2-point rise to a seven-month high. Firms were
more positive about production prospects, total order books and stocks
of finished products, while export order books and past production were
assessed more negatively.

The Commission’s separate Business Climate Indicator rose for the
third month in a row, edging up 0.03 point after a 0.21-point rise since
November. Here again, the improvement was mainly driven by better
production expectations, order books and lower finished-goods
inventories.

The improvement in the Eurozone factory PMI in February (49.0) was
marginal after January’s 1.9-point rebound, pointing to limited upside
in the near term. While output appears to be no long contracting (50.4),
the ongoing decline in new orders (47.1) signals sluggish activity
ahead.

Contrary to most forecasts, sentiment in the services eroded
slightly after a marked rebound in January, as positive assessments of
the past business situation and expected demand were broadly offset by
weaker past demand.

However, morale in the financial services, which is not seasonally
adjusted, improved sharply for the second month in a row with a
four-point jump to a six-month high, driven mainly by recent trends, but
also somewhat brighter near-term demand prospects.

In contrast to the industry PMI, the Eurozone services PMI suffered
a setback in February, due largely to a reversal of the strong pick-up
seen in France in January. Eurozone activity fell back into negative
territory (49.4) and new business remained on a downward trend (49.1).

The Commission’s flash estimate for consumer sentiment was revised
down marginally to show a 0.4-point monthly gain to -20.3 — still
7.6 points below the long-term average. Households were less pessimistic
about overall economic prospects and their own financial outlook but
more concerned about future labor market trends. Their plans for major
purchases over the coming year deteriorated, approaching the record low
seen last May.

Retail sentiment recovered by 1.3 points slightly after a steep
slide over the past year, remaining 5.4 points below average. Retailers
said recent business had picked up and were somewhat less pessimistic
about near-term trends.

In construction, morale improved markedly to the highest
level in over three years, as fuller order books and better hiring
prospects (notably in Spain) offset weaker recent activity.

Apart from construction, employment expectations deteriorated in
all sectors. Selling-price expectations were revised down in all
sectors except for industry.

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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