Euro zone sentiment hits three-year high, inflation expectations jump

Easing of COVID-19 restrictions, in Berlin
FILE PHOTO: People enjoy their drinks at a terrace of Revolte bar, as cafes, bars and restaurants reopen their terraces after being closed down for months, amid the coronavirus disease (COVID-19) outbreak, in Berlin, Germany, May 21, 2021. REUTERS/Christian Mang

May 28, 2021

BRUSSELS (Reuters) – Economic sentiment improved by more than expected to a three-year high in May, data showed on Friday, with the strongest gains in services, retail and among consumers as governments eased pandemic restrictions.

The European Commission’s economic sentiment index rose to 114.5 points in May from 110.5 in April, beating expectations in a Reuters poll of an improvement to 112.1. It was the highest level of the index since January 2018.

Optimism in services, which make up two thirds of the euro zone economy, rose the most to 11.3 points from 2.2, far above expectations of a rise to 7.5.

Sentiment in the retail sector rose to 0.4 from -3.0 as many shops reopened after lockdowns. Consumer sentiment increased to -5.1 from -8.1 in April, moving well above the long-term average of -11.0. The mood in industry pushed to a new all-time high and in construction also recorded a gain.

The higher optimism about the economy translated into higher inflation expectations with the index for consumers for price trends over the next 12 months moving up to 22.2 from 19.6, above the long-term average of 18.6.

Selling price expectations among manufacturers also jumped to 29.9 in May from 24.2 in April, setting a new all-time high since measurements started in 2000.

(Reporting by Jan Strupczewski; editing by Philip Blenkinsop)