October 30, 2017 / 10:22 AM / a year ago

Euro zone sentiment keeps surging, unaffected by Catalan crisis

BRUSSELS (Reuters) - Euro zone economic sentiment rose in October for the fifth consecutive month to reach its highest level since the start of 2001, showing almost no impact from the Catalan crisis, European Commission data showed on Monday.

A Galeries Lafayette shopping bag is seen hanging on a tourist's travel bag in front of their their store in Paris, France August 2, 2017. REUTERS/Christian Hartmann

The near 17-year high, the highest reading since January 2001 when the bursting of the dot-com bubble had begun to hit confidence in the euro zone, confirmed the economic recovery of the 19-country currency bloc after a decade-long economic and financial crunch.

The monthly survey showed that sentiment in the euro zone rose more than the average forecast of economists polled by Reuters to 114.0 points in October from a 113.1 the previous month.

Confidence grew markedly in Germany, the bloc’s largest economy, and in Italy. It declined in France.

Sentiment also improved in Spain, despite the Catalan crisis, with marked rises in the industry and services sectors. But confidence dropped in the country’s retail sector and among consumers.

Spanish Prime Minister Mariano Rajoy assumed direct control of Catalonia on Friday, hours after the region declared independence following a referendum on Oct. 1.

Data show that “political tensions continue to have little effect on economic sentiment this year”, Bert Colijn, senior economist at ING said.

The figures confirm sound economic growth in the euro zone, which is expected to expand 0.5 percent in the third quarter from the second, forecasts by economists polled by Reuters show.

The European Union statistics office Eurostat will release preliminary estimates on Tuesday on the bloc’s gross domestic product in the third quarter. If the data confirm the 0.5 percent forecast, growth will have slowed from the second quarter’s 0.6 percent.

But economists remain confident growth will accelerate again in the last three months of the year.

“While the available hard data imply that euro-zone GDP growth slowed a little in Q3, we think that it will pick up again in Q4,” economic research firm Capital Economics said in a note.

In October, optimism in the euro zone grew in all surveyed economic sectors, jumping to 16.2 points from 15.4 in September in services, the largest sector in the euro zone.

Industry’s confidence grew to 7.9 from 6.7 and retailers saw a rise to 5.5 from 3.0.

Consumers shared the positive mood, with optimism rising to -1.0 from -1.2 in September, reaching the highest level in 16 years, data released on Monday showed, confirming a preliminary estimate published last week.

The euro zone’s improving sentiment did not extend to Britain, where confidence among consumers dropped to -5.5 from -5.2 in September.

The positive reading for the 19-country euro zone was only partly clouded by a drop in inflation expectations among manufacturers to 8.6 from 10.5 in September.

That could curb output in coming months. Manufacturing production expectations dipped slightly, while export orders rose only marginally.

Inflation expectations among consumers continued to increase, to 14.7 from 14.2 in September.

Additional reporting by Ritvik Carvalho; Editing by Philip Blenkinsop and Larry King

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