Euro-area economic confidence rebounds

23/03/2016 05:55 AST

The euro-area economy showed signs of strengthening in March and confidence rose as the region tried to put a turbulent start to the year behind it.

A gauge of factory and services activity in the 19-nation currency bloc unexpectedly rose this month, with a similar indicator for France indicating a return to expansion after a contraction in February.

In Germany, businessand investor confidence gauges also improved, reversing the recent downward trend in Europe’s largest economy. Economic resilience may be on the mend after an equity rout at the beginning of the year cast doubt over the bloc’s fragile recovery. Nevertheless, weak links remain, with German manufacturing barely growing and prices in the euro area falling.

Tuesday’s terrorist attacks at the airport and metro system in Brussels may also challenge the outlook by further undermining consumer and business sentiment.

“Today’s economic news flow in the euro area was encouraging after the dent seen in the first two months of this year,” said Johannes Gareis, an economist at Natixis SA in Frankfurt.”The Brussels attacks could have a impact on the economy due to fearful consumers but, drawing on the Paris attacks, that could be transitory.”

At least 26 people are reported dead and many more injured after explosions ripped through the Belgian capital’s airport departure hall and a downtown subway station.

While the terrorist attacks that killed 130 people in Paris last November hurt spending and tourism, the latest data show shoppers are returning.

A composite Purchasing Managers Index of euro-area manufacturing and services rose to a three-month high of 53.7 in March from 53 in February, Markit Economics said on Tuesday. That’s well above the 50 level that separates expansion from contraction and exceeded economists’ forecast for a reading of 53. While the report suggests that the region’s economic recovery is continuing, it also highlighted weak inflation pressures, with output prices falling again this month.

An index of services also rose to a three-month high and the manufacturing gauge improved.

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