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Eurozone Consumer Confidence at Highest Level in Nearly a Decade--Update

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05/19/2017 | 05:35pm CEST
By Paul Hannon 

The victory of a pro-European centrist in France's presidential election has helped deliver a further boost to already high consumer confidence in the eurozone.

The European Commission on Friday said its measure of consumer sentiment across the 19-member currency area rose to minus 3.3 in May from minus 3.6 in April, reaching its highest level since July 2007, more than a year before the onset of the global financial crisis.

Emmanuel Macron secured almost two-thirds of the vote in May 7 elections, defeating the anti-euro Marine Le Pen, who vowed to undertake contentious labor reforms in France as part of a push for greater economic convergence among the eurozone's fractious member states.

Mr. Macron's triumph followed March elections in the Netherlands that saw Prime Minister Mark Rutte defeat anti-euro populist candidate Geert Wilders. The French and Dutch votes reduce the threat of a breakup of the currency area, with German elections due later this year almost certain to return a pro-euro government.

Coming into 2017, it had seem possible that anti-euro politicians would gain ground and possibly triumph in a series of key polls, following voter revolts against the establishment in the U.K. and the U.S.

But while investors and policy makers appeared nervous, households have been less so, as the Commission's measure of consumer confidence continued to strengthen ahead of the crucial votes, and subsequently.

Rising consumer optimism since the middle of last year has been driven by a slow, but steady decline in unemployment as well as signs that the eurozone's economic recovery has become more deeply rooted and widespread.

"Improved job markets and recent largely healthy economic news are clearly buoying consumers," said Howard Archer, an economist at IHS Markit. "A dilution of political uncertainties may also be helping confidence."

More confident consumers tend to spend more freely, which would aid the recovery and in turn make anti-euro politicians less likely to triumph in the future. But the eurozone isn't out of the woods yet, as another populist storm is brewing in Italy, where the euroskeptic 5 Star Movement has remained strong and economic growth, has remained especially anemic.

"Political risk has not disappeared, with euroskeptic parties looking set to perform particularly well in Italy's general election, which will be held by next May at the latest," said Jack Allen, an analyst at Capital Economics.

Write to Paul Hannon at paul.hannon@wsj.com

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