Eurozone economy celebrates growth, though progress not uniform

Several countries are celebrating steady growth in the eurozone economy, which just experienced its best quarter in six years. Surveys of France and Germany reflect that progress, while Italy, held back by debt and other weaknesses, faces more uncertainties.

|
Gonzalo Fuentes/Reuters
A businessman walks on the esplanade of La Defense, in the financial and business district in La Defense, west of Paris, April 10, 2014. France, along with Germany and other members of the eurozone economy, just experienced the best quarter in six years, while Italy lacks the same steady growth.

Evidence built on Friday that the sturdy improvement in eurozone economic growth touted by the European Central Bank is in place – albeit with some wobbles.

Cruising speed, not acceleration, Morgan Stanley economists said.

Surveys of purchasing managers' plans in the eurozone, Germany and France all indicated steady growth, if not perhaps as much as some economists had expected.

The broadest of the managers' surveys – IHS Markit's June flash purchasing managers composite index for the eurozone – dipped to 55.7 from 56.8 in May.

This was lower than anyone in a Reuters economists poll had predicted, but still way above 50, the level Markit says divides expansion from contraction.

"Businesses experienced the strongest quarter in six years," Bert Colijn, ING senior economist for the eurozone, said in a note. "With just a week to go in this quarter, all signs are pointing towards a strong (growth) reading."

At the country level, the most significant development may have been France's manufacturing PMI, which rose far more than expected to 55, rising back after a dip in May possibly because the political risks around the presidential and legislative have gone.

Companies also took on workers at the fastest pace in nearly 10 years, a sub-index showed, giving France's new president, Emmanuel Macron, an early economic present.

Overall, however, the PMIs showed something of a tailing off of activity – primarily in services – even if that was within the context of expansion.

Germany's composite index, for example, was down 1.3 points – from a six-year high – to a still solid 56.1.

Happy campers

The business data came on the heels of Thursday's buoyant eurozone consumer sentiment report.

Here again, the news was relative. The actual number was minus 1.3 points, meaning that sentiment is negative.

But that is usually the case with the eurozone. So the fact that there was a jump from -3.3 points in May to the highest level in 16 years was seen as a bullish sign.

"It all points to labor market wage growth and private consumption," Berenberg economist Florian Hense said.

Other data on Friday, however, showed that the eurozone economy is not without its risks.

Italy, the currency bloc's third largest economy, reported a sharp fall in industrial sales and orders in April.

The data, which matched industrial output figures released earlier in the month showing a surprise decline, suggests a poor start to the second quarter after 0.4 percent growth in the first.

Considered by many economists to be the weak link in the eurozone revival, Italy is facing an election next year at the latest, where the anti-euro, anti-establishment 5-Star Movement is currently seen making gains.

The International Monetary Fund projects Italy's economy to grow 1.3 percent this year because of the general eurozone growth picture, but to slow next year.

"Weak productivity and low aggregate investment remain key challenges for faster growth, held back by structural weaknesses, high public debt, and impaired bank balance sheets," the IMF said this month in its latest report.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Eurozone economy celebrates growth, though progress not uniform
Read this article in
https://www.csmonitor.com/Business/2017/0623/Eurozone-economy-celebrates-growth-though-progress-not-uniform
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe