Investor confidence in the euro area economy improved for the third consecutive month in January. It climbed to its highest level since last May. However, Sentix warned that it is premature to talk about a turnaround in the euro area’s economic development.
One point higher
The aggregate index of investor confidence in the euro area economy increased to minus 15.8 points in January from minus 16.8 points in December. The sub-indexes assessing the current situation and outlook also rose by one point. The current situation index was minus 22.5 points, while the expectations index was minus 8.8 points.
“This still probably does not mean a turnaround. This is partly due to Germany, whose economy is still in recession and therefore in crisis,” Sentix said. For the prospect of a turnaround to be justified, the firm said, the expectations index needs to move into positive territory.
Impact of lower inflation
Given the decline in inflation, investors expect both the European Central Bank (ECB) and the US Federal Reserve (Fed) to support economic growth by cutting interest rates in the near term. However, Sentix warned that the outlook for inflation in the Eurozone has worsened recently due to, among other things, rising transport costs as a result of security problems in the Red Sea. “Hopes for interest rates could thus prove to be delusional, which could put further strain on the ailing eurozone economy,” it warned.
Source Czech Press Office
