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Eurozone economy starts 2017 with a nice dollop of good news

03/01/2017

There was good news indeed on the Eurozone economy yesterday, as the latest purchasing managers’ indexes covering manufacturing were released.

68-month high, 67-month high, 35-month high, maybe we should use the word boom, the latest rolex replica purchasing managers’ indexes, or PMIs, covering manufacturing across the Eurozone were unremittingly good.

PMIs for Netherlands and Austria hit a 68-month high, for France they rose to a 67-month high, while in Germany they rose to a 35-month high.

In fact, every country for which there was a reading posted a higher score than was seen the month before, although in Greece the PMI was at a mere four-month high, Italy a six-month high and Spain an 11-month high.

The Eurozone, as a whole, saw its PMI rise to a 5½ year high.

So much for the historical comparison, but what do the PMIs tell us about each of the economy’s they measure?

In the world of PMIs, 50 is the key. Any reading under 50 suggests contraction, any reading above suggests growth. Only Greece saw a reading less than 50, while the Netherlands and Austria were positively in boom territory.

As for the Eurozone in its entirety, the index rose to 54.9, and that is consistent with an annual growth rate of four per cent.

This all begs the question: why? Why did the PMI’s rise so strongly? Chris Williamson, Chief Business Economist at IHS Markit said: “Much of the upturn in demand and the rise in price pressures is attributable to the depreciation of the euro, which companies often cited as making exports more competitively priced but also hiking import prices, exacerbating rising global prices for commodities such as oil.”

But what about the prospects for 2017? Mr Williamson was less upbeat, saying: “While the strong end to 2016 is encouraging news, the manufacturing revival clearly remains vulnerable to political risk. In particular, elections in the Netherlands, France and Germany represent potential key flashpoints which could lead to a marked intensification of political uncertainty in the region in 2017. Hence our expectation that Eurozone economic growth will slow slightly in 2017, down from 1.7 per cent in 2016 to 1.4 per cent.”

 

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