EU economic sentiment data beat expectations in December and rose to levels not seen since 2007.

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Business confidence led the overall increase with rises in both the industrials and services sectors.

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A simple diffusion index of this data tracks the breadth across the Euro Zone (19 countries) and the European Union (28 countries). In both cases, the number of countries that experienced a rise in sentiment overwhelmed those that saw a decrease, resulting in multi-year highs of +7 and +9, respectively.

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For Germany, economic sentiment reached a five-year high of 109.6, led by strength in construction confidence.

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Industrial confidence also rose, after a slight decline in November, to multi-year highs.

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Strength in observed, as well as expected, production trends offset continued weak assessment of trends in orders, while price and employment expectations remained steady.

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The relative optimism of this survey data continues to deviate from corresponding ‘hard’ data, highlighted by today’s other release: German industrial orders. While orders are still up versus a year ago, November’s 2.5% month-over-month decline (light blue line below) was the worst since August 2014.

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In addition, the real strength in orders has come not from domestic demand (flat year-over-year) but from foreign orders (up ~5.5%yoy) and, specifically, non-eurozone (+7.86%yoy) demand.

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Improving survey data is, no doubt, a step in the right direction. Sure would be nice to see that optimism confirmed by some hard data– especially from Europe’s largest economy.

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