The Eurozone economy grew at the fastest pace since 2011, according to a study the company’s financial information Markit. However, the economists who expect European Central Bank (ECB) limit incentives for the economy anytime soon are only a few, due to political uncertainties, which could divert the Eurozone from the path of economic recovery.
The Purchasing Managers’ Index (PMI), which is a broad measure of economic activity, rose to 56 points in February from 54.4 points the previous month. Level above 50 means growth and value in February is 70 months maximum.
The growth of production activity is leading in the industrial sector but the service sector is also doing very well. Growth accelerated in all four major Eurozone economies – Germany, France, Italy and Spain. The strongest growth, however, in Ireland, which recently emerged from the severe crisis that plunged because of bank failures.
The labor market is also beginning to expand strongly by creating new jobs is the fastest pace in nearly ten years.
The study suggests that companies are facing inflationary cost of 69 month high mainly due to higher prices of supplies, increased personnel costs and a weak EUR, which in turn raises the cost of imports. Given the solid growth and rising inflation, some analysts suggest that the ECB will begin to weaken the incentive program. Few are those who believe that the bank will announce such intentions at its meeting on monetary policy next week.
Overall, most economists agree that the ECB will stock its current policy due to a series of political uncertainties in the coming months – particularly elections in the Netherlands, France and Germany, and the start of negotiations for entering the UK from the EU.