French economy leads as eurozone hesitates

France, the fastest growing of the large eurozone economies, reported improving business and consumer confidence on Thursday but European Commission figures gave little reason to expect a spurt in the region as a whole.
Economists believe the updates on the economic climate from Brussels, Paris, Berlin and Rome continued to point to a steady if unspectacular economic recovery and that the European Central Bank does not need to rush into interest rate rises for fear of consumer price inflation.
The Commission said economic sentiment in the 12-nation area was little changed in September despite marginal improvements in industrial and household morale. It also announced a dip in inflation to 2.2 percent year-on-year this month from 2.3 percent in August despite high oil prices.
"Eurozone economic confidence numbers are not looking so rosy for ECB optimism on stronger recovery," Bear Stearns said in a research note.
"They may continue to talk about the upside risks to inflation but we remain of the view that the ECB can afford to hold off hiking rates for many months yet," ING Bank said.
The European Commission readout for September put eurozone economic sentiment overall at 100.7 versus 100.9 in August, figures that compare with a record high of 116.3 in 2000 before the global economy went into a downward spiral. There were marginal rises however in industry and consumer confidence.
In France, where recovery has been more marked with growth rates of 0.8 percent and 0.7 percent in the first and second quarters of the year, state statistics office INSEE said that confidence was rising despite yet another rise in unemployment.
French unemployment, stubbornly above the eurozone average, rose to 9.9 percent in August from 9.8 percent the month before, although economists believe the jobs market in the eurozone's second biggest economy is on the mend, as the government says.
INSEE said that its business confidence index edged up to 106 from 105 in September and another measure of consumer confidence improved markedly, to -17 from -23.
But Italian business confidence fell in September after two months on the rise, separate data from Rome showed. Economic institute ISAE reported a dip in its confidence index, to 95.9 from 98.1 in August. Consumer morale nevertheless rose for a fourth straight month in September.
In Germany, the engineering industry association VDMA said orders for that industry rose a healthy 22 percent in August versus the same month of 2003.