Eurozone Growth: Falling in September, Yet Steady Expansion Ongoing

Written by | Friday, September 25th, 2015

Eurozone’s growth rate slowed down last month with Purchasing Managers Index falling to 53.9 points from 54.3 in August. Despite the monthly slowdown, the Eurozone’s economy expanded at the fastest quarterly rate in four years. Moreover, the Purchasing Managers Index was still above the healthy threshold of 50 points and the average index was 54 points between June and August.
Data companyMarkit commented that the readings “pointed to steady growth of the Eurozone economy at the end of the third quarter”. The company said the indicators were positive overall but there were still some concerns that the rate of growth has not improved despite the massive quantitative easing (QE) of the European Central Bank (ECB). The ECB has been running the program to support the economy, boost growth and ward off deflation, which costs 60-billion-euro per month.
Markit Chief Economist, Chris Williamson, commented that “the September PMI surveys indicate a further steady expansion of the Eurozone economy but there remains a worrying failure of growth to accelerate to a pace sufficient to generate either higher inflation or strong job creation”. He added that the ECB would undoubtedly like to see more “bang for their euros” yet it was disputable whether the current figures are weak enough to encourage the ECB to intervene more aggressively.
In fact, there are growing speculations whether the Frankfurt-based central bank will be forced to step up its QE program following last week’s decision of the US Federal Reserve to postpone raising interest rates citing the slowdown in China and market volatility. Jennifer McKeown, Senior European Economist at London-based Capital Economics, commented that “given the likelihood of a slowdown to come, the ECB has every justification for upping the pace of its quantitative easing program in the months ahead.”

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