Eurozone Economic Confidence At 10-Month High

Eurozone economic confidence rose more-than-expected in October to its highest level thus far this year, as the region weathered the uncertainty from the 'Brexit' vote.

The economic sentiment index improved to 106.3 from 104.9 in September, survey data from the European Commission showed Friday. This was the highest level since December 2015, when the reading was 106.6. The expected score was 104.9.

The October/September increases in sentiment suggests that any hit to Eurozone consumers and businesses from the UK's Brexit vote in June was limited and has waned, IHS Global Insight economist Howard Archer said.

However, the economist said it was highly possible that the 'Brexit' vote will impact more significantly on Eurozone confidence and activity in 2017 as the U.K. triggers Article 50.

The survey should provide the European Central Bank with some comfort that the recovery has continued, Jennifer McKeown, an economist at Capital Economics, said.

But with inflation pressures still very weak, the economist suspects that the bank will still extend its asset purchases by six months at the current pace in December.

Improved Eurozone sentiment resulted from marked increases in confidence in the industry, services and construction sectors, while sentiment in retail trade and among consumers remained broadly flat.

The industrial confidence indicator climbed to -0.6 from -1.8, mainly driven by a marked improvement in managers' production expectations and better assessments of overall order books and inventories.

The confidence index for services rose to 12 from 10 in September, led by managers' significantly brighter assessment of past demand and the past business situation.

The consumer confidence index improved slightly to -8 as initially estimated from -8.2 in the previous month. The improvement resulted from a much more negative assessment of future unemployment, which was offset by more positive views on households' future financial situation.

Meanwhile, the retailers' confidence index held steady at 0.4 in October as a marked improvement in managers' views on the expected business situation, offset by a strong deterioration in the assessment of the present business situation.

The confidence index for construction rose to -14.3 from -15.6 in the previous month. The marked rise in construction confidence was fueled by upward revisions in managers' employment expectations, while their order book assessment remained broadly stable.

The business climate index rose marginally to 0.55 in October from 0.44 in September. Managers' production expectations and their assessments of export order books improved sharply.

Also their assessments of the past production, the level of overall order books and the stocks of finished products improved in October.

Third quarter GDP data released on Friday by member countries of euro area signaled a mixed picture. The French economy recovered after contracting in the second quarter, while growth in Spain eased marginally.

Spain's economic growth slowed to 0.7 percent from 0.8 percent in the third quarter. A similar slower growth was last logged in the final three months of 2014. Nonetheless, the economy expanded for the twelfth consecutive quarter.

France's gross domestic product expanded 0.2 percent sequentially, reversing a 0.1 percent fall a quarter ago. But the pace of growth was slightly weaker than the expected 0.3 percent.

Eurozone GDP data for the third quarter is due on October 31.