Written By Europe’s economic recovery has gained momentum in recent weeks, with business activity increasing to levels that have exceeded expectations. The Eurozone economy is now firmly on the path to a robust rebound from its coronavirus-induced slump, as businesses across all sectors are reporting higher levels of activity. This is great news for the continent, and it could be a sign that the European Union’s single currency is about to experience a period of strong growth. In this blog post, we will explore what factors have contributed to this surge in business activity, and what it could mean for the future of the Eurozone economy.
Eurozone Business Activity Surges Ahead Of Expectations
According to the latest data from IHS Markit, business activity in the Eurozone is surging ahead of expectations. The data shows that manufacturing and services activity expanded at a faster pace in August, driving the Composite Purchasing Managers’ Index (PMI) up to 54.4 from 53.9 in July. This was well above the 50 threshold that indicates expansion and the highest reading since April 2011.
Rob Dobson, director at IHS Markit, said: “August saw a renewed and widespread upturn in eurozone business activity growth, with rates of expansion in both manufacturing and service sector output accelerating to near six-year highs. Moreover, new orders continued to increase solidly, underpinning further job creation across the region.”
The strong data will be a boost for policymakers at the European Central Bank (ECB), who have been trying to boost growth and inflation in the face of headwinds such as Brexit uncertainty and trade tensions. ECB President Mario Draghi is expected to announce further stimulus measures later this month.
The pickup in activity was led by a sharp acceleration in manufacturing output growth, which reached a six-and-a-half year high. New orders also rose sharply, driven by stronger demand from both domestic and export markets. Employment also continued to rise solidity, albeit at a slightly slower pace than July’s five-year high.
Manufacturing and Services PMI Both Rise
The latest Manufacturing and Services Purchasing Managers’ Index (PMI) figures released today show that the eurozone rebound is continuing apace, with business activity in both sectors rising at a faster-than-expected pace in March.
The manufacturing PMI came in at 57.7, up from 56.9 in February and well ahead of expectations for a reading of 56.5. The services PMI rose to 56.6 in March from 55.4 in February, again beating expectations for a reading of 55.2.
Both readings were the highest since April 2011, and suggest that the eurozone economy is now growing at its fastest pace in nearly six years.
The strong showing by both manufacturing and services will be welcome news for policymakers as it suggests that the eurozone recovery is becoming more broadly based. The hope is that this will help to underpin further growth in the months ahead as businesses invest more and consumers spend more.
Employment Also Rises
In recent years, the Eurozone has been mired in recession and debt crisis. However, there are now signs that the region is on the mend. Business activity in the Eurozone surged ahead of expectations in February, according to a new report. This uptick in activity was driven by strong growth in both manufacturing and services. Employment also rose during the month, providing further evidence that the Eurozone economy is improving.
These positive developments come as welcome news to policymakers and businesses alike. The Eurozone has been working to regain its footing since the global financial crisis of 2008-2009. While there have been some setbacks along the way, it appears that the region is finally starting to see sustained economic growth. This bodes well for the future of the Eurozone and its member states.
Prices Continue to Rise
Prices in the Eurozone continue to rise, according to the latest data from the European Commission. The rate of inflation was 0.4% in March, up from 0.3% in February. This is the highest rate of inflation since October 2014, and is well above the European Central Bank’s target of close to 2%.
The main drivers of inflation in the Eurozone are energy prices, which rose by 1.8% in March. Food prices also rose, by 0.7%. There was some good news for consumers, as services prices fell by 0.1%.
The rate of inflation is likely to increase in the coming months as energy prices continue to rise. This will put pressure on household budgets and may lead to slower growth in consumer spending.
Consumer Confidence Rises
Consumer confidence in the eurozone rebounded in February, as businesses activity surged ahead of expectations. The European Commission’s monthly economic sentiment index rose to 107.8 from a revised 106.3 in January, beating expectations for a reading of 106.5.
The index is now at its highest level since early 2011 and points to a strong start to the year for the eurozone economy. Businesses across the region reported robust growth in new orders and output, while employment continued to rise.
Inflation remains low, however, which is likely to keep policymakers at the European Central Bank on their toes as they watch for any signs of price pressures building up. Nonetheless, the latest data will be welcome news for policymakers as they continue to grapple with Brexit uncertainty and trade tensions with the US.
Conclusion
The Eurozone economy is showing signs of strength, with business activity surging ahead of expectations. Despite the downturn in global markets due to COVID-19 and other factors, Eurozone businesses have demonstrated resilience, as evidenced by the uptick in manufacturing output and services sector growth. As Europe continues to emerge from economic uncertainty, this rebound highlights the importance of maintaining close ties between European countries in order to foster further collaboration on a regional scale and ensure sustainable long-term growth for all involved.
