European Economic Confidence Grows

03 April 2006

European consumer and corporate confidence reached a five year high last month, according to Luxembourg-based statistics office Eurostat.

A European Union index of economic sentiment among households and companies including retailers increased to 102.8 in March, from 102.7 in February.

However, any heating-up of the EU economy is expected to prompt hikes in European Central Bank interest rates.

Expansion in the Euro region will accelerate to about 2.1% this year from 1.3% last year, according to the ECB, whose officials expressed concern about a rise in inflation, which the bank aims to keep below two percent.

Investors expect the bank to lift its benchmark lending rate, currently 2.5%, to 3.25% by the end of this year

Comments Neville Hill, economist at Credit Suisse in London: "The fact that the economy is strengthening and broadening means there will be more interest-rate increases from the ECB. In this environment, the ECB has just begun."

Data sourced from (Germany); additional content by WARC staff