The economic confidence in Europe surged to a 2-year high in the month of August, as the recovery of the bloc’s currency increased after it came out of a long recession which set a record. An index for the consumer and executive sentiment rose for the fourth month to reach 95.2 up from 92.5 in the month of July. This is according to a report in Brussels from the European Commission. This increased surpassed most of the forecasts by the economists which had placed it at 93.8. The services, retail, manufacturing and the consumer confidence all increased.
The improved momentum in the economy of the euro-area -since the region started growing again following a contraction of 18 months – has boosted the equities, with a rise of about 4% in the Stoxx Europe 600 Index in the previous two months. Regardless of this, Europe has continued to struggle with a debt crisis legacy that is currently in its fourth year and a jobless rate which hit a record 12.1% in the month of July.
Alice Schuiling, a senior economist at Amsterdam’s ABN Amro Bank NV, in a telephone interview said that the recession had ended and the recovery had begun. She however adds that the only risk will be that people might become excessively overjoyed and expect the economy to grow in a straight line and it is probable that this will not be the situation. She adds that there is still severity and in most of the countries, the labor market is weak and so is the housing market.
In the United Kingdom, there was positive news, with GfK NOP Ltd. Saying that its consumer confidence index increased by 3 points to reach minus 13 in August. This is the highest point in approximately four years. The United Kingdom’s prediction for growth by the British Chamber of Commerce for 2013 and 2014 was raised to 1.3 % and 2.2 %. According to the Bank of England, the approvals for mortgages rose in July, to reach the highest point in over 5 years. The Nationwide Building Society also had good news, reporting that the prices for the houses had increased in August by 0.6%. During an interview with the Daily Mail, Mark Carney, the Bank of England Governor, said the that the policy makers were keeping an eye on the housing market and that they would take action if there emerged any signs of a bubble.
Carney had earlier in the week pointed out that the property market was getting better and that the present concerns might be exaggerated. He added that they were observing it closely and they would make their views with regards of the risk degree and the probable action to be taken known at the appropriate time.
The economic rebound of Europe has sustained the companies in the region. Carrefour SA, which is the largest retailer in France, reported a profit increase of 4.9% in the first half of the year, with the domestic market revival offsetting the southern Europe’s economic hardships. The earnings experienced in France increased by 75%. Bouygues SA (EN), a French company for telecommunication, television and building, reported a 10% profit increase in the 2nd quarter.