The latest Markit composite Purchasing Managers’ Index (PMI) for the Eurozone suggests that business output in the 19 member bloc is growing at its fastest rate for almost four years. The reading of 54.1 is up by 1.1 over the February reading – any figure above 50 indicates that the sector under measurement is expanding. On the basis of this data, Markit is projecting that Q1 growth for 2015 will match Q4 2014, coming in at a figure of 0.3%. Growth in new orders has increased at its fastest rate since 2011, but of course, this is coming off a low base where demand in Europe and globally has been weak for quite some time.
Encouragingly, Markit’s analysis revealed that employment has also enjoyed its fastest rate of growth since the summer of 2011 with a pick-up in the manufacturing sector and consolidation within the service sector which is close to the level seen in February; itself a four-year high. Unemployment within the Eurozone has eased over the last twelve months from 11.5 to 11.2%, but is still well above the long-term average figure of 9.5% (1995 to 2015 average). It peaked at 12% in February 2013 and enjoyed a record low of 7.2% in March 2008 (unemployment is a lagging indicator of the economic cycle). According to Eurostat, 18 million people are unemployed across the Eurozone; the figure for the wider EU being 23.8 million.
It is likely that the improvement is due to a number of factors acting in concert: the relatively weak Euro is boosting exports; the sharp decline in the oil price is reducing energy and transport costs; low inflation (for once, below wage inflation) means that consumers have slightly more spending power (also due reduced energy and fuel costs) and, possibly, the EU QE measures are starting to have an effect. However, the ECB programme, although announced in January, only came into effect on the 9th of this month, so it is premature to give it too much credit yet, although it will have improved sentiment already.