Economic confidence in Europe bounced back in April, according to key report released early last week, adding to hopes that the region might now have passed the trough in the current downturn, although the European Central Bank said it was still concerned about the effects of low inflation. In a major test of the mood in Europe, the European Commission’s closely watched economic sentiment indicator for the 16- member Eurozone rose from a record low of 64.7 in March to 67.2 in April, to reach its highest level since January, but low inflation means that the ECB is likely to press on next month with its rate-cutting cycle.

While the European Union’s statistics office said in a preliminary report that inflation in the Eurozone came in at 0.6 percent in April, it also released data showing unemployment ticking up to 8.9 percent in March as the global recession hits the currency bloc’s labour market. The Eurozone jobless rate stood at 8.7 percent in February with inflation also coming in at 0.6 percent in March. However, signs of the impact on the Eurozone economy of the downturn in the world economy and evidence of dwindling inflation are likely to force the ECB to keep trimming rates and to adopt measures to ease monetary policy. The ECB is expected to cut rates again at its meeting next month and to announce a series of co-called unconventional measures aimed at spurring economic growth.

The commission’s survey was the latest in a string of leading European sentiment surveys pointing to an economic turnaround by the end of the year as the global economy emerges from its biggest slump since World War II. German business confidence hit a fivemonth high in April, a key report released last week said with the surveys also showing a pickup in the mood of industry in France and Belgium. The release of the surveys coincided with a stronger-than-forecast rise in the currency bloc’s purchasing managers’ index (PMI), with talk of better economic times ahead also emerging from the world’s two powerhouse economies - the US and China.

The improvement in the sentiment surveys came despite a steady stream of bleak economic data underscoring how the global recession tightened its grip on the Eurozone in the first months of the year. Unemployment in Spain soared to 17.36 percent in the first quarter as the numbers out of work rose to over four million. Unemployment stood at 13.9 percent in the last quarter of 2008. The German Government has cut its economic forecast and now expects the Eurozone biggest economy to contract by six percent this year as production and exports fall steeply and order books contract dramatically. But also helping to raise hopes that the worse might now be behind Europe were fresh figures from Germany’s key plant and machinery sector. The VDMA industry group said new orders for Germany’s key plant and machinery sector fell a real 35 percent in March compared to the same month last year.

However, the slump in March was less than steep yearon- year falls in the two previous months with orders plunging by 49 percent in February and by 42 per cent in January. The Eurozone jobless rate stood at 8.7 percent in February with inflation also coming in at 0.6 per cent in March. Eurozone unemployment stood at 7.2 per cent in March 2008, Eurostat said. But signs of the impact on the Eurozone economy of the downturn in the world economy and evidence of dwindling inflation are likely to force the ECB to keep trimming rates and to follow new steps to ease monetary policy. “Although Eurozone inflation was flat at 0.6 percent in April, this is a pause in a firmly downward trend,” Jennifer McKeown, European economist with the Capital Economics research group told Deutsche-Presse-Agentur (dpa).