Political risk…what political risk?
Businesses and consumers in the eurozone have shrugged off the prospect of a tumultuous 2017, registering the highest levels of economic confidence seen in the bloc since 2011.
The European Commission’s measure of economic sentiment in the single currency area rose by 1.2 points to 107.8 in December, led by healthy bumps in France, the Netherlands and Germany.
It comes in the same month the European Central Bank unveiled an extension of its stimulus measures to lift growth and inflation by buying assets until at least December 2017.
Non-eurozone businesses and households also had a good month, with economic sentiment up 3.7 points in Sweden, 1.7 points in Poland and 1.3 points in the UK at the end of the year – another sign the British economy has shown few adverse effects from the June’s referendum.
The new year will bring major political tests for establishment parties in some of the eurozone’s most important economies. Austria, the Netherlands and France all go to the polls in elections in the first half of the year, followed by a German vote in the autumn.
Despite the healthy headline numbers, Italy’s economic confidence was flat in a month where the country’s prime minister resigned following a failed constitutional referendum. The gauge also slipped 2.2 points in Spain.
“The Italian referendum and subsequent concern about the Italian banking sector has not impacted confidence in the eurozone and it caused a mere stagnation in sentiment in Italy itself”, said Bert Colijn at ING.
The survey found consumers are helping driven the eurozone’s moderate recovery, with steadily falling unemployment levels boosting household spending power.
Chart via Bloomberg