Europe's recovery still fragile as eurozone business growth dips

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The economic recovery in the eurozone lost some momentum last month.


Surveys of company purchasing managers (PMIs) showed only modest growth at businesses in the two largest economies – Germany and France.


The surveys showed companies cut jobs at a faster pace in October .. but they also continued to trim prices charged to customers, which means inflation should remain low.


The data pointed to fragile growth which keeps the pressure on the European Central Bank to take some action to stimulate the region’s economy – though probably not an interest rate cut at their policy meeting on Thursday.


“Our view is that rates will remain on hold … although we expect that ECB President (Mario) Draghi will ‘disclose’ that a rate cut was considered,” said analysts at Rabobank.


Financial markets also question what effect a straightforward interest rate cut would have given that rates are already at record lows.


Britain and Ireland data upbeat


British indicators added to evidence the UK is spearheading Europe’s recovery from recession.


UK industrial output in September came in much better than expected, following on from Tuesday’s upbeat business surveys.


The Bank of England meets on Wednesday and Thursday and is not expected to change policy, having said it will keep interest rates at their record low until unemployment falls to seven percent.


Economists expect the Bank to bring forward its expectation for when that will happen – currently late 2016 – when it publishes new forecasts next week.


Ireland’s services sector PMI was one of the few unambiguously positive surveys from Wednesday’s eurozone data, showing the strongest growth since 2006.


Eurozone shoppers hold back


At the same time we learned that retail sales in the eurozone fell more than expected in September, with southern Europe – particularly Portugal and Spain – suffering.


Shoppers held back with purchases amid a slow economic recovery weighed down by record high unemployment and tight access to credit.


The volume of retail trade fell 0.6 percent on the month after a revised 0.5 percent rise in August, the EU’s statistics office Eurostat said.


Sales of both food and non-food products fell and the volume of sales of automotive fuels was flat on the month.


Compared with the same period last year, September retail sales were up 0.3 percent, following three straight months of declines, the data showed.