European economic confidence bounces back

[March 19, 2010]  BRUSSELS (AP) -- European business and consumer confidence bounced back in April for the first time in nearly two years, the European Commission said Wednesday.

The EU executive said its monthly survey of companies and shoppers across the European Union and in the 16 countries that share the euro showed more optimism for the first time since May 2007, rising from record lows.

It said there was "a clear improvement in sentiment in industry and among consumers" in both regions. But EU and euro-zone construction companies were more downbeat than last month and euro retailers were also more pessimistic, not matching optimism from all EU retailers.

A separate survey of industry managers also rose for the first time since May 2008 but is still at a very low level and points to shrinking output for March, it said.

Industry is also warning that it has cut back capacity to the lowest levels since 1990 -- to 71 percent in the EU and 70.5 percent in the euro area -- and expects to reduce investment by around a fifth this year.

The economic sentiment indicator measuring confidence from consumers and different business sectors rose to 63.9 in April from 60.4 in March for the entire 27-state European Union. For the smaller euro area, the indicator rose to 67.2 this month from 64.7 last month.

Among larger countries, Italy, Britain, the Netherlands, Spain and Poland saw "significant increases in sentiment" with far smaller pickups in France and Germany.

A survey of financial services -- not included in the overall figure -- also improved markedly, the EU said.

Overall, business managers saw a better situation ahead and said they expected more demand for their services -- the first time they saw an improvement since October. Industry said they expected more new orders in the next three months.

The business climate indicator -- which focuses on industry managers -- also increased in April to minus 3.33 from minus 3.49 in March.

The EU added a note of caution by saying sentiment was still at a very low level and pointed to another year-on-year contraction in industrial output in March, following a record fall in February.

"It also suggests that annual industrial production growth will remain clearly subdued in April," it said.

Managers' expectations of export orders continues to worsen, it said.

A survey of industrial investment showed that managers in most EU nations also expect a sharp decrease in investment this year, saying it could drop 18 percent in the EU and by 20 percent in the euro zone. A fall 2008 survey had predicted only a 5-percent drop for both areas.

[Associated Press; By AOIFE WHITE]

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