Business sentiment index improves but consumer confidence stays low

Prospects of continuing consumer spending strength and above-average GDP growth helped Greece’s economic sentiment index rebound strongly in December, the Foundation for Economic and Industrial Research (IOBE) announced yesterday. The index rose to 92.1 points from 88.7 in November 2005. This represents the biggest increase in the eurozone, although overall the index still lagged behind the eurozone average, which rose to 100.5 points in December from 99.9 in November. The economic climate index is based on business expectations, sub-indices covering industry, construction, retail trade and services, and a survey tracking levels of consumer confidence. The rise was mainly attributed to improved confidence in Greece’s retail trade and industrial sectors. By contrast, the outlook in the services sector worsened. The survey showed that retailers and consumers have very different visions of the future, with the former being decidedly more optimistic. The business expectations index among retailers jumped to 108.8 points in December from 103.6 in December. The rise is based on estimates of rising sales in the fourth quarter of 2005. Almost half the respondents (45 percent) expect this rising trend to continue over the following months. Consumers, on the other hand, believe their finances will worsen in 2006: the difference between the pessimists and the optimists is 23 percentage points, up from 22 in November. They are even more pessimistic about public finances: the difference between pessimists and optimists is 28 percentage points, up from 27 in November. The business expectations index in services slumped to 93.2 points from 96.8 in November, while the construction index dropped to 78.8 points, from 81.7 in November. The industry index improved to 98.4 points, from 95.6 in November.

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