Eurozone saved by service sector
August 6, 2014 9:59 amVideo
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Concerns that the eurozone had stopped growing were put to rest on on Tuesday with the release of the latest PMI showing an improvement in the service sector.
Markit’s final reading of the composite purchasing managers index (PMI) gave the union’s economy a grade of 53.8 for July, which is above June’s grade of 52.8, but lower than the earlier flash estimate of 54. The final mark is the region’s second highest in three years while the service sector’s individual grade climbed up to its own three year high of 54.2 to give ground to the belief that domestic demand among its member countries is growing.
Berenberg Economics’ economist Rob Wood says that, “The eurozone recovery will remain modest, but will gradually firm from 0.2 per cent in the second quarter to 0.3 per cent in the third quarter and 0.4 per cent in the fourth quarter.” He added that the eurozone’s fragile growth is facing even increased risk and uncertainty due to the behavior of its Putin-led neighbor, Russia.
Inflation in the monetary union dropped to its lowest in four in a half years in July at 0.4% despite the European Central Bank’s unveiling of unconventional measures aimed to spur growth and pull up inflation to their target of just below 2%. The central bank is now under pressure to introduce additional policy which may include outright asset buying through quantitative easing.
Another area of concern is the eurozone’s unemployment rate which is currently near a record high at 11.5%. Economist Chris Williamson from Markit believes that economic growth greater than 0.4% is needed to make a significant improvement in job creation.
The material has been provided by InstaForex Company – www.instaforex.com
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