Eurozone economy growing at ‘fastest rate in 6 years’

Thursday May 04, 2017
Written by Pan Pylas, The Associated Press
May 4, 2017 - European stocks got a sizeable lift Thursday after centrist French presidential candidate Emmanuel Macron was widely perceived to have gotten the better of the far-right’s Marine Le Pen in a televised debate and a survey showed economic growth in the 19-country eurozone striking a six-year high.

Financial information company IHS Markit said its purchasing managers’ composite output index — a broad gauge of economic activity — rose to 56.8 points in April from 56.4 the previous month. The reading was at its highest level since April 2011 and a tad ahead of the earlier estimate. Anything above 50 indicates expansion.

Chris Williamson, the firm’s chief business economist, said the survey portrays “an economy that is growing at an encouragingly robust pace and that risks are moving from the downside to a more balanced situation.” He said it’s consistent with quarterly growth of 0.7 per cent. If sustained through May and June, that would mean a marked pick-up from the 0.5 per cent growth recorded in the first quarter.

Economic growth appears to be broad-based across manufacturing and services and across countries. The big two eurozone economies, Germany and France, are growing at around a 0.7 per cent rate, Williamson said. Elsewhere, he noted that Spain and Ireland are expanding at an even faster rate and that Italy appears to be heading in the right direction following years of stagnation.

“The encouraging picture from the survey data is likely to help raise many forecasters’ expectations of eurozone economic growth in 2017,” Williamson said.

He also said it will “no doubt add to speculation” that the rhetoric coming out of the European Central Bank will “turn increasingly hawkish.”

Market expectations are growing that the ECB could soon start reining in its bond-buying stimulus program, especially if the more euro-friendly Macron wins Sunday’s French presidential election against Le Pen. Many in the markets think a Macron victory is more likely now following a television debate on Wednesday — shares across Europe have rebounded strongly, with the CAC 40 in Paris up 0.7 per cent and the euro 0.4 per cent firmer against the dollar at $1.0920.

“While Le Pen was widely seen as being better suited to the event, it is Macron that is believed to have fared better in the scathing encounter, helping to protect his substantial lead in the process and ease concerns about a late surge by the National Front leader,” said Craig Erlam, senior market analyst at OANDA.

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