EU economic sentiment data beat expectations in December and rose to levels not seen since 2007.
Business confidence led the overall increase with rises in both the industrials and services sectors.
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.
For Germany, economic sentiment reached a five-year high of 109.6, led by strength in construction confidence.
Industrial confidence also rose, after a slight decline in November, to multi-year highs.
Strength in observed, as well as expected, production trends offset continued weak assessment of trends in orders, while price and employment expectations remained steady.
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.
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.
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.