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Wednesday, October 05, 2005

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EDITORIAL
 
Europe's economic confidence high
Ralph Atkins
10/5/2005
 

          ECONOMIC confidence indices for September compiled by the Commission rose to their highest levels since February for both the European Union and 12-country eurozone, suggesting some of the recent economic gloom has been exaggerated.
The pick-up in business confidence reflected "buoyant demand in America, Asia and from the oil producers, and an exchange rate which has not been particularly strong", said Ian Harwood, economist at Dresdner Kleinwort Wasserstein.
However, business confidence is racing ahead of consumer confidence. Highlighting the weakness of consumer demand in Europe's largest economy, German retail sales figures for August lately showed the third consecutive monthly decline.
At the same time, higher oil prices have fed through into headline inflation, with eurozone inflation leaping from an annual rate of 2.2 per cent in August to 2.5 per cent in September, according to a "flash" estimate by Eurostat, the EU's statistical unit. Inflation was last this high in May 2004. That is likely to heighten the nervousness of the European Central Bank ahead of its rate-setting meeting in Athens on October 6.
Jean-Claude Trichet, ECB president, will be keen to keep expectations about inflation in check, possibly by hinting that an interest rate rise is more likely. Nevertheless, the ECB is expected to leave its main interest rate unchanged at 2.0 per cent for the 28th month running.
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