ECONOMIC confidence in the euro area rose more than economists forecast in January, adding to signs that the single currency area may be emerging from a recession.
An index of executive and consumer sentiment rose to 89.2 from a revised 87.8 in December, the European Commission in Brussels said yesterday. That's the highest since June and was significantly higher than most forecasts.
The euro strengthened above $1.35 for the first time since 2011.
ECB president Mario Draghi said in Davos last week that economic activity was "stabilising at a very low level" and Germany's Bundesbank expected Europe's largest economy to rebound in the first quarter from a contraction at the end of 2012.
"The series of positive surprises on eurozone survey releases in January support our growth scenario," said Evelyn Herrmann, an economist at BNP Paribas.
While leading indicators "are still at levels in line with contraction", she wrote, "their upward trend supports our forecast of a slowdown in the pace of contraction" from 0.4pc in the fourth quarter to 0.1pc in the first three months of this year.
The euro-area economy shrank 0.1pc in the third quarter after a 0.2pc contraction in the three previous months.
The renewed confidence came as figures showed that Spain's recession deepened more than economists forecast in the fourth quarter as the government's struggle to rein in the eurozone's second-largest budget deficit weighed on domestic demand. Gross domestic product fell 0.7pc in the three months through December, more than the 0.6pc contraction the Bank of Spain predicted last week.
A gauge of sentiment among European manufacturers improved to minus 13.9 from minus 14.2 in December, yesterday's report showed.
An indicator of services confidence rose to minus 8.8 from minus 9.8, while consumer sentiment climbed to minus 23.9.
While policy makers are cautious to call an end to the three-year-old debt crisis in the euro area, they are starting to become more optimistic.
"The fire is under control," German deputy finance minister Steffen Kampeter told the BBC yesterday. "But we have to take care it will not start again."
SAP, the biggest maker of business-management software, has forecast at least a 12pc gain in full-year earnings as the company adds internet-based programs to attract users.