Tuesday, October 25, 2016

The Euro-Area Economy Is Beating Expectations By Sid Verma

Buoyant sentiment in Germany helps turn the dial

The economic momentum of the euro area is outpacing expectations, with a gauge of its performance relative to analysts' predictions now at a 2016 high. The Citigroup Surprise Index for the region, which measures how official data comes in relative to market expectations, has jumped since late September, underscoring better-than-forecast expansion in Germany and the so-far limited fallout from the Brexit vote on the single-currency bloc's financial system. The index stands at a year-to-date high of 34.30, a level last reached in November. On Monday, a Purchasing Managers’ Index for manufacturing and services rose to 53.7 for October from 52.6 in September, the fast pace since the start of the year, according to IHS Markit Ltd, driven by a strong expansion in factory activity in Germany. The Munich-based Ifo Institute's survey for October, which measures business sentiment in the country based on 7,000 responses from different sectors, rose to 110.5 on Tuesday, up from 109.5 in September and its highest level since April 2014, further underscoring increased optimism in Europe's largest economy. "Both the levels and the direction taken by the components confirm activity is accelerating," Maxime Sbaihi,  Bloomberg Intelligence economist, wrote in a note on Tuesday. "That’s also evident from other recent survey data from Germany, leaving financial markets with a strong impression of the economy as the end of the year approaches." Bloomberg