World Economy

Eurozone Showing Signs of Slow Growth

Eurozone Showing Signs of Slow Growth Eurozone Showing Signs of Slow Growth

A survey shows that the economy of the 19-country eurozone began 2017 with relatively strong growth.

The so-called purchasing managers’ index, a gauge of activity in the manufacturing and services sectors, edged down to 54.3 points in January from the previous month’s 54.4, which was the highest level since mid-2011, AP reported.

The survey, published Tuesday by IHS Markit, showed exports doing well and employment enjoying its biggest monthly rise since February 2008. Prices were also shown to be on the rise, largely due to higher commodity prices.

Chris Williamson, chief business economist at IHS Markit, said the “the eurozone economy has started 2017 on a strong note.” He estimated that it pointed to a quarterly economic growth of 0.4%.

Figures for economic activity in the final three months of last year will be released Jan. 31, but most economists—including those at the European Central Bank—estimate growth picked up from the sluggish pace of the previous six months.

“Firms’ expectations about the year ahead are running at the highest for at least 4½ years, highlighting how political risk continues to be widely eschewed, with companies focusing instead on expanding their sales in the coming year,” said Williamson.

A stronger performance by the eurozone in 2017 would aid an expected acceleration in global economic growth after a disappointing 2016. But few economists expect the early pace of expansion to be sustained, with higher inflation set to weaken consumer spending, and a series of key elections expected to sap confidence and damp investment. 

According to Consensus Economics, which monitors the economic forecasts of banks and other financial institutions, the eurozone’s economy is expected to grow by a meager 1.4% this year, having likely expanded by 1.6% last year.

Eurozone policy makers are also concerned by developments in the US and China, fearing President Donald Trump’s more confrontational stance on trade relations and the possibility of a sharper slowdown in the world’s second-largest economy.

“The risks surrounding the eurozone growth outlook remain tilted to the downside and relate predominantly to global factors,” said ECB President Mario Draghi at a news conference Thursday.

Germany’s economy appears to have slowed, as its PMI fell to 54.7 from 55.2 in December, reaching a four-month low.

For now, hopes for an improved 2017 appear to rest with France. The eurozone’s second largest member recorded a rise in its composite PMI to 53.8 from 53.1 in December, hitting a 67-month high. According to the survey, French businesses added to their payrolls at the fastest pace in over five years.

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