Kuwait Times

France joins the party as eurozone outlook shines Jobs component rises at fastest rate since 2007

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PARIS: The eurozone’s economy improved sharply this month and enjoyed some rare positive news about jobs, with French business activity unexpected­ly matching that in big beast Germany just as its presidenti­al race heats up.

Preliminar­y purchasing manager surveys on Tuesday for both countries and the whole 19member euro zone were nearly all better than anyone polled by Reuters had expected and suggested the economy will be increasing­ly robust in the near-term.

The eurozone’s jobs component grew at its fastest since August 2007, propelled by strong demand and rising optimism. Employment is one of the euro zone’s primary weaknesses, with joblessnes­s running just below 10 percent, double the rate in the United States.

Overall, euro zone private sector and manufactur­ing growth accelerate­d to near a six-year high in February, according to IHS Markit’s monthly Purchasing Managers’ Indexes (PMIs), which gauge businesses’ expectatio­ns of how the economy will perform. “With domestic demand strengthen­ing and a weaker euro boosting orders from abroad, the euro zone economy is seeing robust growth for the moment,” ING economists said in a note.

There was also evidence within the reports of rising inflation, something the European Central Bank will doubtless note if not yet act upon. But the flash survey for France is likely to have raised eyebrows the most. The picture it painted of a solid recovery will play straight into spring’s presidenti­al election, in which far-right National Front candidate Marine Le Pen is seeking to harness popular discontent to beat more mainstream rivals.

At 56.2, France’s PMI combining both manufactur­ing and services for February was the highest it has been in nearly six years. It was also better than the 56.1 reading for Germany, the euro zone’s economic powerhouse.

“France (is) joining the party,” Chris Williamson, chief business economist at PMI compiler IHS Markit, said. Most of the French improvemen­t came in the services sector, with the manufactur­ing index actually falling short of expectatio­ns although it remained well above the 50 line that denotes growth.

All three leading presidenti­al candidates in France have argued that deep changes are needed in the French economy.

Le Pen wants to take France out of the euro currency bloc as a matter of national sovereignt­y and also promises popular moves such as lowering the retirement age, taxing the wealthy and cutting energy prices. Centrist Emmanuel Macron wants closer ties between euro zone government­s and labour reform, while conservati­ve Francois Fillon wants to cut public sector jobs, raise the retirement age and cut public spending.

ALL AHEAD

Germany was no slouch either. Growth in its private sector picked up to the highest level in nearly three years, driven mainly by its bustling factories. The composite PMI for Germany rose to 56.1 from 54.8 in January - a 34-month high and much better than the consensus forecast in a Reuters poll of 54.7.

IHS Markit’s Williamson said the data suggested the German economy was likely to grow 0.6 percent in the first three months of 2017 after expanding 0.4 percent in 2016’s final quarter.

Reflecting stronger growth in output and new business, German firms continued to hire more staff in February, with the overall rate of job creation picking up to reach its highest since June 2011. For the euro zone as a whole the flash, or preliminar­y, composite survey rose sharply to 56.0, the highest since April 2011, from 54.4 in January, confoundin­g expectatio­ns for a slight dip to 54.3. “Firing on all cylinders,” Morgan Stanley said in a note. “The PMI details show increased business optimism, strong order books, faster job creation and also rising inflationa­ry pressures.” —Reuters

 ??  ?? BRUSSELS: United Kingdom’s Treasury State Secretary David Gauke (L) attends an Economic and Financial (ECOFIN) Affairs Council meeting at the European Council, in Brussels, yesterday. —AFP
BRUSSELS: United Kingdom’s Treasury State Secretary David Gauke (L) attends an Economic and Financial (ECOFIN) Affairs Council meeting at the European Council, in Brussels, yesterday. —AFP

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