Eurozone’s Strong Start in 2014

Written by | Saturday, January 25th, 2014

The eurozone’s recovery is gathering pace as the Markit Purchasing Managers’ Index (PMI) rose from 52.1 in December last year to 53.2 in January. The PMI measures business activity across thousands of firms with figures above 50 indicating already a good economic health. Surveys also show that private sector in the currency block is growing and getting stronger far more than expected. The January rank of 52.1 beat all expectations though France is still facing downturn in manufacturing. Recent polls showed that the economic activity in the country contracted in January for the third consecutive month.
In contrast, Germany’s PMI logged the 31-month high, and just like the rest of the eurozone, Germany is growing with growth rates being the highest since mid-2011. If the current trend continues, the eurozone might grow about 0.3 – 0.4 percent in the first quarter unlike the initial forecasts of about 0.1 – 0.2 percent. Moreover, the good news is that recovery is slowly coming back also to the bail-out countries. For instance, Spain and Ireland marked a strong rise in demand for their bonds while eurozone bonds as such reached their 5.5-year maximum.
The European Central Bank cannot do much to provide more boost to the recovery since it has already provided banks with more than one trillion in cash as well as slashed its main interest rate to almost zero. Yet, it is not believed that much help will be needed thanks to the rising demand for manufacturing goods, which is the strongest in the last three years.

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