Euro-Area Maintains Momentum as Weaker Currency Boosts Business Activities

Euro-Area Economy
  • Euro-Area Maintains Momentum as Weaker Currency Boosts Business Activities

The euro-area economy maintained its growth momentum in December, after data showed signs of a pickup in inflationary pressures.

A composite Purchasing Managers’ Index held at 53.9 in December, the highest this year and above the 50 mark that divides expansion from contraction. A measure of input prices rose to the highest in 5 1/2 years, which Markit blamed on the euro’s depreciation and rising global commodity prices.

Growth in the headline index was led by manufacturing, with that gauge jumping to the strongest since 2011. Markit said the improvement was partly linked to the weaker currency.

The latest signs that the economy is growing at a steady — if not spectacular — pace come a week after the European Central Bank’s decision to prolong its asset purchases through 2017, while lowering the monthly amount starting in April.

With euro-area inflation still low, President Mario Draghi said the central bank will have a presence in markets “for a long time.” He also warned of potential uncertainty ahead linked to national votes in 2017.

“There is clearly the potential for political uncertainty to derail growth as elections loom in the Netherlands, France and Germany, and Brexit discussions begin,” said Markit Chief Economist Chris Williamson.

Williamson said the intensification of inflationary pressures was the “most significant development” this month and something that will “please ECB policymakers.”

In Germany, the region’s largest economy, the composite PMI was at 54.8 this month after a reading of 55 in November, capping the strongest three-month period since the second quarter of 2014. France’s index rose to 52.8 — an 18-month high — from 51.4.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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