Economic confidence improves in Europe.

30th March, 2021

Former President of the European Central Bank (ECB) Mario Draghi took the helm of Italy’s government during February. The move provided a welcome boost for sentiment, which was buoyed by the prospect of stability after months of political turmoil, a faltering economy, and high Covid-19 infection rates. Business and consumer confidence improved, and the FTSE MIB Index rose by 5.9% over the month.

Economic sentiment in the eurozone improved during February, according to a monthly survey undertaken by the European Commission. Sentiment – which has been generally dampened by a slower-than-hoped rollout of the Covid-19 vaccine – was supported by signs of strengthening confidence in industry, services and among consumers, but optimism in the retail sector deteriorated.

The eurozone’s economy performed slightly better than initially calculated during the final quarter of 2020, shrinking by 0.6%. Both Spain and Germany managed to register positive growth of 0.4% and 0.1% respectively, while France contracted by 1.3%. Over 2020 as a whole, the euro area posted an economic contraction of 6.8%. The eurozone’s annualised rate of inflation strengthened to 0.9% in January from -0.3% in December, compared with a rate of 1.4% a year ago. The Dax Index rose by 2.6% during February, while the CAC 40 Index posted an increase of 5.6%.

Germany’s economy expanded by 0.3% during the final quarter of 2020. Over the final three months of the year, exports rose by 4.5%, while consumer spending dropped by 3.3% following a third-quarter increase of 10.8%. Over 2020, the country’s economy shrank by 5.3%. Export activity continued to rise during December, lifted by an 11.6% increase in shipments to China and an 8.4% rise in exports to the US. Overall, having risen by 2.3% in November, exports posted a 0.1% increase in December, while imports fell by 0.1%.

German business sentiment staged a marked improvement during February, according to the Ifo Institute. Confidence amongst manufacturers climbed to its highest level since November 2018; meanwhile, sentiment in the services sector improved and the tourism sector demonstrated “cautious optimism” ahead of the approaching holiday season. Elsewhere, investor sentiment strengthened at a faster-than-expected pace during February, according to the ZEW-Leibniz Centre, whose President Achim Wabach commented: “The financial market experts … are confident that the German economy will be back on the growth track within the next six months”.

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