Optimism over the economy in the eurozone rose this month to its highest since last May, in spite of the ongoing slowdown. Analysts said the European Commission’s survey did not include the most recent developments in the coronavirus epidemic.
The Commission’s eurozone economic sentiment indicator rose 0.9 points month-on-month in February to 103.5 points, the highest since last May and beating expectations for a rise to 102.8.
Confidence in the manufacturing sector improved the most, with the sub-index rising to -6.1 from -7.0 in January, while optimism in the service sector barely improved, rising to 11.2 from 11.0.
Economists at ING noted that the survey takes place in the first two weeks of the month and, therefore, did not include any impact on sentiment from the most recent spread of the coronavirus, which has now hit Europe.
“The good news is that the manufacturing sector is bottoming out and that with the inventory correction coming to an end, the sector is set for a recovery. The bad news is that with the distortion of supply chains and trade flows caused by Covid-19, the upturn will now be a few months delayed,” ING said.
On top of that, things now look a bit uglier in the services sector, which was up until now the stronghold of the economy that prevented a more severe slowdown in 2019, ING said.
“Especially leisure, tourism and transport are bound to suffer from coronavirus fears. Looking at the Chinese experience, peak Covid-19 should be behind us in the second quarter, but that still makes a rather weak first half of the year,” the bank’s economists said.
The coronavirus broke out in the central Chinese city of Wuhan in December and has since killed around 3,000 people and infected almost 80,000. The vast majority of cases have been in mainland China, but with several hundred cases reported across Italy, Germany, France, the UK, Greece, Austria and Croatia, the European economy is at risk of slowdown.