UPDATE 1-Euro zone consumer confidence improves in August

(Adds details, quotes)

BRUSSELS, Aug 23 (BestGrowthStock) – Euro zone consumer confidence
showed a steady improvement in August, figures from the European
Commission showed on Monday, although the longer term prospects
for the region’s growth remain uncertain.

The Commission’s flash estimate of consumer optimism in the
16-country currency area rose to -11.7 this month from a revised
14.0 in July (previously reported as 14.1), the data showed. The
figure puts the index at a 27-month high.

Across the whole 27 country European Union, sentiment
improved to -11.4 from -13.8.

Consumer morale is among a string of recent economic
indicators that have pointed to a steady recovery by the euro
zone economy from the financial and economic crisis, although
expectations are that growth will taper in the second half of
the year after a strong showing in the second quarter.

While exports have been strong, the rebound has not filtered
through to consumer demand, which will be the driver of any
long-term and sustained return to growth for the region.

“Becoming more confident about the economy is one thing.
Opening your purse and increasing spending is another,” said ING
economist Martin van Vliet.

“With the improvement in consumer sentiment mainly confined
to the frugal ‘core’ economies, any strengthening in overall
euro zone consumer spending over the coming quarters will likely
be modest and insufficient to offset the slowdown in exports
resulting from the weakening in global demand.”

The euro zone recorded growth of 1.0 percent in the second
quarter from the first — exceeding U.S. growth in the same
period — but with the U.S. and Chinese economies both showing
signs of slowing down, the prospects for European exports are
dimming.

Most euro zone countries are committed to cutting spending
and reining in their budget deficits in order to bring finances
back into check and avoid a Greek-style debt crisis.

With public sector spending being slashed back, and
unemployment stuck at 10 percent — a 12-year high — there is
little likelihood of a near-term upturn in consumer spending.

There is also a great deal of divergence among the euro
zone’s 16 economies, with Germany, France and the Netherlands
showing positive signs, but many others, including Spain,
Greece, Portugal and Ireland struggling to overcome recession.

“We suspect that the overall euro zone figure once again
masks considerable divergence between member states,” said Van
Vliet.

“Ongoing pessimism in the Southern periphery, where
aggressive fiscal tightening is squeezing consumers’ wallets, is
likely to be offset by improving sentiment in (most of) the
“core” Eurozone countries.”

A breakdown of the figures is due to be released next week.

UPDATE 1-Euro zone consumer confidence improves in August