A new report has revealed that economic mood in the Euro zone reached a seven-month high in January due to increased optimism across all sectors except construction, with both consumer and business inflation forecasts falling dramatically.
The Economic Sentiment Index (ESI) of the European Commission soared to 99.9 this month, up from a corrected 97.1 in December — the highest level since June 2022.
Despite the oil price and cost of living crises as well as the conflict in Ukraine, the rising optimism indicates that an anticipated economic slump in the 20 nations sharing the euro, if it occurs at all, is likely to be mild.
The European Central Bank will likely continue to raise interest rates to contain inflation, which in December was above 9% compared to the bank’s aim of 2%, despite the improvement in sentiment and economic growth forecasts.
The monthly survey conducted by the Commission revealed that consumer inflation expectations fell to 17.7 in January from 23.2 in December, significantly below the long-term average of 20.0, a pattern that is sure to satisfy the ECB.
Indicative of a reduction in inflationary pressures in the early stages of the supply chain, manufacturers’ sales price forecasts fell substantially to 31.9 in January from 37.8 in December.