Sentiment improves in storm-tossed euro zone

In what may prove to be the triumph of hope over reason, economic confidence in the euro zone unexpectedly rose this month.

The news comes despite the single-currency bloc being mired in its second recession in four years.

An index of executive and consumer sentiment in the 17-nation euro area increased to 85.7 from a revised 84.3 last month, the European Commission in Brussels said yesterday. Economists had forecast no change from an initial reading of 84.5, the median of 33 economists' estimates in a Bloomberg News survey showed.

The Organisation for Economic Cooperation and Development (OECD) last week forecast contractions of 0.4 per cent and 0.1 per cent this year and next.

"We continue to consider the euro area as the largest source of downside risks," Pier Carlo Padoan, the chief economist at the OECD, said on Wednesday. "Financial shocks could break the already fragile situation, leading to a further downward revision of growth."

A gauge of sentiment among European manufacturers improved to minus 15.1 from minus 18.3 last month, yesterday's report showed. An indicator of services confidence rose to minus 11.9 from minus 12.1, while consumer sentiment declined to minus 26.9. Sentiment in the construction industry fell from the previous month.

Meanwhile, in the United Kingdom, an index of retail sales rose to a five-month high this month, according to the Confederation of British Industry.

The gauge of annual sales growth increased to 33 from 30 last month, the business lobby said yesterday. Still, sales remain below average for the time of year.

Household spending rose the most in more than two years in the third quarter. The gain may prove shortlived amid subdued wage growth and the economic headwinds from the turmoil in Europe.

British bank lending to households and businesses shrank last month, according to Bank of England data.

Outstanding loans to households and non-financial businesses from UK banks and building societies fell to £701 million (Dh4.12 billion) last month, after expanding to £1.1 billion in September

* compiled from Bloomberg News and Dow Jones