According to the latest reports, economic sentiment in the Eurozone fell slightly in May, continuing a downward trend seen over the past four months. According to the European Commission (EC), the economic sentiment index (ESI) was fell from April's 112.7 points to 112.5 points in May. May's result marked a nine-month low. However, overall, sentiment in the Eurozone remains at a high reading considering the past two decades thanks to a robust economic recovery. Declines in sentiment in the manufacturing and services drove May's dip in sentiment. However, they were partially balanced out by rising confidence in the construction and retail trade sectors. Meanwhile, consumer confidence was virtually unchanged. Employment plans were mixed across sectors falling notably in the industrial and construction sectors, but rising to an over 18 year high in the construction sector. At a country level, economic sentiment fell in nine economies in May, including in France, Italy and Spain. However, sentiment rose in several other economies, including Germany.
Some time back, the European Commission raised its growth projections for the euro zone. The EC is more confident than ever before that the solid economic recovery in Europe will endure through 2019. The commission, the EU's executive arm, said the 19-country single currency bloc's economy would expand by 2.3 percent in 2018, up from a previous forecast of 2.1 percent made in November.
Growth would then continue at a solid pace next year, with the euro zone economy expanding by 2.0 percent in 2019, instead of the earlier- predicted 1.9 percent. In the words of EU Economic Affairs Commissioner, "The euro area is enjoying growth rates not seen since before the financial crisis. Unemployment and deficits continue to fall and investment is at last rising in a meaningful way."
There are signs that the European economy, long in trouble, is now looking up. Official data last week showed that growth in the euro zone shot up in 2017 to 2.5 percent, with unemployment currently at a nine- year low. The news was especially positive for France, the euro zone's second biggest economy, which saw its forecast revised sharply higher to 2.0 percent for this year. This was up from the 1.7 percent prediction just three months ago, and will be the first time the country will reach the psychologically important threshold since 2011. It will also likely mean enough growth to keep France clear of breaching the EU's deficit limit, which is set in terms of the size of the economy.
Brussels said that the EU-27 as a whole, minus Britain, would expand by 2.5 percent this year and 2.1 percent in 2019. Britain meanwhile would expand far below that level, at 1.4 percent in 2018 and 1.1 percent in 2019. However, the commission, which is also leading the EU-Britain divorce talks, markedly increased the UK's growth estimate for 2017 to 1.8 percent. In November, the EU said Britain would only reach 1.5 percent growth. Powerhouse Germany meanwhile, will remain above the two percent threshold, expanding by 2.3 percent in 2018 and 2.1 percent next year.
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, reaching the highest level in 16 years, data recently released showed, confirming a preliminary estimate.The positive reading for the euro zone was only partly clouded by a drop in inflation expectations among manufacturers to 8.6 from 10.5 three months ago.