Confidence grows in eurozone economy

Confidence in the euro zone's economy rose for a second consecutive month in February, a survey showed on Tuesday, confirming a wider stabilisation across Europe that likely signals only a mild recession this year. The European Commission's economic sentiment indicator rose by a point in the euro zone to 94.4, better than the 93.9 forecast by economists in a Reuters poll, and a recovery to October's level.
The rise built on January's increase, which was the first improvement in sentiment since March last year. But business morale was fractionally worse than forecast, rising to -0.18 compared with economists' estimates of -0.15. On a national level, German optimism in the economy barely rose from January, even if France showed some recovery.
"There are few signs here that a burst of economic growth is going to help to solve the debt crisis," said Jonathan Loynes, chief European economist at Capital Economics. The Commission expects the euro zone's economic output to shrink 0.3 percent in 2012, the second recession in just three years for the currency area. But last year's political deal among most EU countries to commit to budget austerity and the European Central Bank's offer of near unlimited funds have calmed markets and bought policymakers some time.
The green shoots of recovery are a turnaround from the final months of 2011, when investors forced borrowing costs to unsustainably high levels for Spain and Italy and depressed business morale in the euro zone and the wider European Union. Confidence in industry improved in February, while optimism in services remained unchanged from January. Unemployment in the euro zone is at record highs at about 10 percent of the working population and is expected to rise this year as the currency area heads into its recession. France reported a 1.6-point increase in economic sentiment, and there were rises in the Netherlands and Italy. But there was barely any change from January's level in Germany, Europe's biggest economy, which nudged up 0.1 point. Spain saw sentiment worsen and morale remained low in Portugal and Greece.