Rising optimism in industry and services boosted eurozone economic sentiment more than expected in October, data showed on Thursday, pointing to continued recovery amid subdued inflation expectations. A monthly survey by the European Commission showed economic sentiment in the 16-country euro area jumped to 86.2 points in October from 82.8 points in September, well above Reuters consensus estimates of a rise to 84.0 points.
"This adds to the recent run of good news, and we continue to expect the euro zone economy to expand by a solid 1.5 percent in 2010 and 2011," said Jennifer McKeown, economist at Capital Economics. More good news came from Germany, where unemployment fell unexpectedly in October for the fourth straight month thanks to government steps to prevent layoffs. The number of jobless fell by 26,000 month-on-month against expectations of a 20,000 rise.
Sentiment in eurozone industry rose to -21 points from -24 points, and in services to -7 from -9. The indicator for consumers increased to -18 from -19. The mood remained stable in the retail sector at -15.
Despite the overall better mood, some eurozone countries were facing deepening challenges as Moody's rating agency cut its outlook for eurozone member Portugal's debt ratings and put Greece on review for a possible cut. Economists cautioned that while sentiment was improving, it was still at relatively low levels, which, combined with low capacity utilisation was likely to keep consumer spending and corporate investment and employment plans subdued.