Eurozone Economic Sentiment Hits Unexpected 4-Year High On Industrial, Service Confidence

Eurozone economic confidence rose to a four-year high in September on improved industrial and service-sector sentiment, defying market expectations. The consumer and executive confidence index rose to 105.6 this month from a revised 104.1 in August, the European Commission said Tuesday. The uptick ran contrary to economists' predictions of a decline to 104.1 from the previously reported 104.2, according to Bloomberg data.

The reading is the highest since the index recorded 106.1 in April 2011.

The European Commission also measured inflation expectations among consumers for the coming 12 months, and found that it rose to 3.2 in September after dipping to 3.1 in August from 4.2 in July. However, it remained significantly lower than the long-term average of 19.7.

Industrial confidence in the region increased to minus 2.2, from minus 3.7 in August, fueled by rising production expectations. Sentiment in the services sector rose to 12.4 from 10.1 in the same period, fueled by expectations of increased demand.

Overall consumer confidence worsened slightly to minus 7.1 from minus 6.9 in the month before, and construction confidence also fell to minus 23.3 from minus 22.7 in August, the commission's report found.

European Central Bank President Mario Draghi said earlier this month that the ECB is prepared to expand its quantitative easing (QE) program to inject liquidity into the eurozone markets if falling oil prices and slowdown in emerging markets seemed likely to worsen the inflation outlook. Core inflation slowed to 0.9 percent in August from 1 percent in July.

However, eurozone prices have remained stagnant since the ECB began its $1.2 trillion QE program in March, and the inflation rate has slowed to 0.1 percent in August after rising to 0.3 percent in May.