Confidence grows in euro zone economy, but still fragile

Reuters News
Posted: Feb 28, 2012 5:13 AM

BRUSSELS (Reuters) - Confidence in the euro zone's economy rose for a second consecutive month in February, a survey showed on Tuesday, confirming a wider stabilization across Europe that policymakers hope signals only a mild recession this year.

The European Commission's economic sentiment indicator rose by 1.0 point in the euro zone to 94.4, better than the 93.9 forecast by economists in a Reuters poll. The rise built on January's increase, which was the first improvement in sentiment since March last year.

In terms of business morale, the Commission's monthly report came in fractionally worse than forecast, rising to -0.18 compared to economists' estimates of -0.15, lifted by managers' optimism about future orders and production but dampened by worries about exports.

That mixed picture was evident across the 17-nation euro zone, with France reporting a 1.6-point increase in economic sentiment, and rises in the Netherlands and Italy. But there was barely any change from January's level in Germany, Europe's biggest economy.

The Commission expects the euro zone's economic output to shrink 0.3 percent in 2012, but the EU's top economic official Olli Rehn sees a recovery in the second half of the year.

But the economy remains fragile.

Confidence in industry improved in February, the Commission's survey showed. Optimism in services remained unchanged from January, while fears about joblessness rose.

Unemployment in the euro zone is at record highs at about 10 percent of the working population and is expected to rise this year as the currency area heads into recession.

(Reporting By Robin Emmott; editing by Rex Merrifield)