2016.09.2910:51:00UTC+00Euro Zone September Economic Sentiment Beats Expectations, Recovery Set to Continue

Data from the European Commission showed on Thursday that economic sentiment index in September bounced back in both the euro area (by 1.4 points to 104.9) and the European Union (by 1.8 points to 105.6) after three months of negative or flat developments. Data beat expectations of no change and moved further above the long-term average of 100.0.

Data showed that manufacturers shrugged off concerns about the impact of the U.K.'s decision to leave the European Union. Pickup in export orders helped boost confidence in September to its highest level this year. Sentiment in the services sector, which generates two thirds of the euro zone's GDP, rose to 10.0 in September from 9.9 in August and the mood among consumers rose to -8.2 this month from -8.5 last month, well above the long-term average since 1990 of -12.7.

Seperate data also showed the Commission's business climate indicator, which points to the phase of the business cycle, also jumped to 0.45 in September, its highest level since October 2015, beating market expectations of a modest rise to 0.05 from 0.03 in August.

The Commission said economic sentiment improved the most in the biggest euro zone economies - Germany, France, Italy, Spain and the Netherlands. The Commission's ESI for the U.K. rose for the second straight month, to 104.6 from 104.0.

Economic sentiment is an early indicator of economic activity, signalling trends in gross domestic product growth. Survey found that households expected prices to rise more rapidly over the coming 12 months than they did in August, while businesses also expect to raise their prices more rapidly suggesting positive boost to inflation as well.