Eurozone consumer confidence rose to its highest level since early 2022 in May, while wage growth data supported views that the European Central Bank will end its policy easing with an expected interest rate cut in June.
Preliminary results of the European Commission's monthly survey released on Thursday showed that the preliminary consumer confidence index rose to -14.3 from -14.7 in April, marking the fourth consecutive month of increases. Economists had expected the score for the month to be -14.0.
The EU's corresponding index rose to minus 13.2 from minus 13.7 the previous month.
Both indexes hit their highest levels since February 2022.
The committee said consumer confidence remains below its long-term average.
Data for the latest survey was collected from May 1st to May 22nd.
The final results of the consumer sentiment index are scheduled to be released on May 30th along with the monthly economic survey.
A European Central Bank figure released early Thursday showed negotiated wages rose 4.7 percent in the first quarter from a year earlier, faster than the 4.5 percent increase in the previous three months.
Bert Collin, an economist at ING, said the increase was unexpected as wage growth is expected to slow, but that Germany's catch-up effect could lead to another rise at the start of the year.
“This should help purchasing power recover faster than expected, boosting household consumption and thus supporting the cautious economic recovery the euro area has embarked on,” the economists said.
Collaine also noted that concerns about how quickly wage growth will ultimately fall are likely to further heated up discussions as ECB policymakers gather for their next policy meeting in two weeks. .
“I don't think this will deter the ECB from cutting rates in June, but it is more likely they will keep rates on hold in July,” Collain added.
Commerzbank economist Marco Wagner also believes the latest figures do not preclude a rate cut in June, but they do cloud the outlook for further easing beyond that.
“Given the dovish nature of the Governing Council, the latest figures do not preclude the ECB from cutting interest rates for the first time in June,” Wagner said.
“However, if wage growth continues to strengthen in coming months and upside risks to inflation materialise, current market expectations of further rate cuts, particularly in 2025, may be overly optimistic.”
Track market movements affecting commodities, stocks and forex with this week's real-time RTTNews economic calendar.
