Brussels, July 4 (Bloomberg) -- Confidence among executives in the 11-country euro zone rose to a
record in June, while unemployment held at an eight-year low in May, two reports showed in a further sign
that economic growth is gaining momentum.
A European Commission index that measures manufacturers' optimism, by balancing positive and
negative responses to a survey, rose to 8 from a revised 5 in May. The region's jobless rate held at 9.2
percent, the lowest since July 1992, a separate report from the commission's statistics office showed.
The euro has shed a fifth of its value against the dollar since its inception in January 1999, boosting
exports from companies across the region. That has raised sales for companies such as Royal Philips
Electronics NV, Europe's second-biggest chipmaker, and BASF AG, Europe's biggest chemicals maker.
``We're certainly more optimistic,'' said Antonio Brotini, chairman of Tuscany-based shoe manufacturer
Pakerson srl, and head of ANCI, the Italian shoemakers association. ANCI expects sales to rise this year
after falling for three consecutive years.
Analysts said unemployment in the region, still twice as high as in the U.S., is likely to fall in coming months
as manufacturers step up production and consumers increase spending. The euro-area economy is likely
to expand 3.4 percent this year, its fastest pace in a decade, potentially pushing inflation above the ECB's
ceiling of 2 percent, analysts said.
Executives' optimism about the economy ``is at its highest in two decades,'' suggesting production will
expand further, said Stephane Deo, an economist at Goldman Sachs.
50,000 Companies
The commission's manufacturing index is part of a broader survey of 50,000 companies and 25,000
consumers across the European Union, a region that includes the euro zone and four other countries.
The survey covers manufacturers, the construction industry as well as consumer confidence.
The commission produces an index that wraps together responses to questions put to the consumers,
manufacturers and construction executives. That overall index for the euro zone was unchanged at a
10-year high of 104, as consumer confidence dipped to minus 1 from plus 1, and construction rose to
plus 3 from 1. The overall index for the 15-nation EU fell to 103.8 from 104.
The European Central Bank, which manages monetary policy in the euro region, has raised its benchmark
refinancing rate by 1.75 percentage points to 4.25 percent in five moves since early November, to ensure
faster economic growth doesn't spur inflation.
The central bank is likely to raise its benchmark rate by another quarter point to 4.50 percent by the end of
the third quarter, according to the median forecast of 22 economists surveyed by Bloomberg News.
ECB Rates
The ECB last week switched to a variable rate from a fixed rate at its regular money-market auctions, in a
move that may lead to higher borrowing costs as commercial banks compete for two-week loans. Today,
the ECB lent funds at a weighted average rate of 4.30 percent, above the bank's floor of 4.25 percent.
Manufacturers have benefited most from the euro's weakness and stronger economic growth this year. A
Bloomberg index of stocks of companies making industrial products, such as Philips and Sagem SA,
posted a return of 37 percent, the highest among Bloomberg 500 stocks.
Sagem, Europe's third-largest military electronics maker, said yesterday that first-half sales rose by a third,
driven by a jump in overseas demand. Foreign sales now account for 58 percent of the company's
turnover, compared with 45 percent a year ago.
Philips predicted last month that sales this year would rise by as much as 50 percent, thanks partly to the
euro's decline. A quarter of the company's sales last year were in the U.S., where it sells televisions,
VCRs, monitors and stereo speakers.
Finland, France and Spain showed the strongest declines in jobless rates in May, today's report showed.
Spain's jobless rate remained the bloc's highest, falling to 14.3 percent in May from a revised 14.5 percent
in April. The jobless rate in Germany remained at 8.4 percent, while in France it fell to 9.8 percent from 10
percent.
Unemployment in the EU as a whole remained unchanged at 8.5 percent in May, according to Eurostat,
the EU's statistics office. |
