Shop­pers res­cu­ing euro-zone growth as ex­ports slow: Agency

Kuwait Times - - BUSINESS -

PARIS: US rat­ing agency Stan­dard and Poor’s said yes­ter­day a bud­ding euro-zone re­cov­ery was gath­er­ing steam thanks to con­sumers loos­en­ing their purse strings. In a report en­ti­tled “Hangin’ In There De­spite Weak For­eign De­mand”, it said do­mes­tic de­mand had emerged as a main driver for growth, off­set­ting ex­port weak­ness.

“The lat­est indi­ca­tors show that stronger do­mes­tic de­mand is over­com­ing soft ex­ports, which sug­gests that the eu­ro­zone up­turn con­tin­ues to forge ahead,” it said. Con­sumers in the eu­ro­zone had pro­vided “a wel­come boost” to growth, most point­edly in pow­er­house Ger­many, but shop­pers were start­ing to spend more else­where, too. Re­cent de­vel­op­ments may be over­tak­ing the Euro­pean Cen­tral Bank’s more gloomy anal­y­sis of the eu­ro­zone econ­omy, Stan­dard and Poor’s said, rec­om­mend­ing that the ECB re­frain from hasty mone­tary eas­ing in its fight against the spec­tre of de­fla­tion.

The cen­tral bank is widely ex­pected to ex­pand its quan­ti­ta­tive eas­ing (QE) pro­gram, which pumps cash into the bank­ing sys­tem in the hope that it will find its way into the real econ­omy, stim­u­lat­ing de­mand. “The ECB is putting too much pres­sure on it­self too soon, as QE pro­grams typ­i­cally need time to pro­duce some ef­fects,” Stan­dard and Poor’s cau­tioned.

The agency said, how­ever, there was still much un­cer­tainty con­cern­ing any sus­tained re­cov­ery in cor­po­rate in­vest­ment, which it iden­ti­fied as the “main way for the eu­ro­zone to lower its stub­bornly high un­em­ploy­ment lev­els.”

Growth in the 19-na­tion eu­ro­zone slowed to 0.3 per­cent in the third quar­ter, of­fi­cial data showed ear­lier this month, with the econ­omy in Ger­many cool­ing as France re­turned to ex­pan­sion.

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