Euro zone economic sentiment rises more than expected in May

BRUSSELS (Reuters) - Euro zone economic sentiment improved more than expected in May and inflation expectations among companies and consumers rose, data from the European Commission showed on Monday.

Economic sentiment in the 19 countries sharing the euro rose to 104.7 this month from an upwardly revised 104.0 in April, beating market consensus of a rise to 104.4 points.

The improvement was due to more optimism among consumers and managers in the retail trade and construction sectors, while confidence remained stable in the industrial sector and decreased slightly in the services sector, the largest in the euro zone economy.

Separately, the Commission's business climate index, which points to the phase of the business cycle, improved to 0.26 in May from an upwardly revised 0.15 in April. The improvement was much higher than market forecasts of a rise to 0.16.

Consumer expectations of price trends over the next 12 months rose to 3.4 in May from 2.9 the previous month, confirming the positive trend recorded in April, but remained well below the long-term average of 19.2.

Companies' expectations of developments in producer prices also rose to -0.7 from a revised -2.8 in April, reaching the highest point since July 2015, although still below the long-term average of 4.8.

The European Central Bank carefully watches inflation expectations in its monetary policy decisions. The bank aims for inflation in the euro zone to be below, but close to 2 percent, over the medium term.

(Brussels newsroom)