Europe Recovery Likely Strengthening 04/23 06:14
A closely-watched survey has found business activity across the 18-country
eurozone running at a three-year high, in perhaps the clearest sign yet that
the economic recovery is gaining momentum.
FRANKFURT, Germany (AP) -- A closely-watched survey has found business
activity across the 18-country eurozone running at a three-year high, in
perhaps the clearest sign yet that the economic recovery is gaining momentum.
Analysts say Wednesday's positive data could take some of the pressure off
the European Central Bank to take further steps to stimulate the economy at its
next monthly policy meeting on May 8 despite stubbornly low inflation across
the 18-country single currency zone.
The Markit survey of purchasing managers --- a closely watched gauge of
business activity --- climbed to 54.0 in April from 53.1 in March. That's the
highest reading since May, 2011. Anything over 50 indicates expansion.
Analysts said Wednesday's figures, which cover both services and
manufacturing companies, showed that the modest recovery in the eurozone was
exhibiting increasing strength.
"Growth is increasingly reaching proper recovery speed, thanks largely to
rebounding domestic demand," economist Christian Schulz at Berenberg Bank said.
Schulz said the strong rise for the services part of the survey, to 53.1
from 52.2 in March, gave a better reading for demand from businesses and
consumers at home. That's as opposed to exporters whose business depends more
on the global economy.
Alarmingly low inflation of only 0.5 percent and high unemployment have
raised fears the rebound was too weak to sustain itself and would require more
stimulus from the European Central Bank. The eurozone grew by a quarterly rate
of 0.2 percent in the fourth quarter of last year. The ECB expects the economy
will grow by only 1.0 percent this year.
Still, unemployment remains painfully high at 11.9 for the eurozone as a
The ECB, in charge of monetary policy for the euro member countries, faces
pressure to cut interest rates or take other measures to increase inflation
toward its goal of just under 2 percent.
Low inflation is a sign of continuing weak demand, and can make it harder
for indebted countries, companies and consumers to pay down debt. Some
economists fear that if further measures are not taken, the eurozone could slip
into outright deflation, a crippling downward price spiral that kills off
growth and jobs. Despite the recent falls in inflation, the ECB says deflation
Wednesday's figures suggest inflation will gradually rise, Schulz said, but
some analysts still say the ECB may yet cut its benchmark interest rate or take
other action in the coming months.