Eu­ro­zone growth sta­ble as in­fla­tion rises to new high

The Myanmar Times - - International Business -

ECO­NOMIC growth in the eu­ro­zone re­mained low but sta­ble in the third quar­ter as in­fla­tion rose to a 27-month high amid fears over Brexit and ma­jor elec­tions in France and Ger­many.

The Euro­stat sta­tis­tics agency said growth in the eu­ro­zone re­mained sta­ble in July to Septem­ber, to 0.3 per­cent, which was on par with an­a­lysts sur­veyed by Fac­tset, a data com­pany.

An­a­lysts said the ex­pan­sion re­mained low and came on the back of France that shook off a con­trac­tion ear­lier in the year to ex­pand by 0.2pc in the third quar­ter.

The growth fig­ure will feed wor­ries that the Euro­pean econ­omy will fail to bring new jobs or sig­nif­i­cantly boost in­fla­tion.

“The up­side for Eu­ro­zone growth con­tin­ues to be con­strained by fun­da­men­tal fac­tors, in­clud­ing struc­tural im­ped­i­ments in a num­ber of coun­tries (no­tably Italy and France) and sig­nif­i­cant bank­ing sec­tor prob­lems,” said IHS Global In­sight’s Howard Archer.

Mr Archer said the per­spec­tive for next year re­mained a par­tic­u­lar con­cern with key elec­tions loom­ing, as well as the launch of tricky ne­go­ti­a­tions be­tween Britain and the EU af­ter the Bri­tish vote to leave the bloc.

“The UK’s Brexit vote could im­pact on Eu­ro­zone ac­tiv­ity in 2017 ... [as] its likely dif­fi­cult exit ne­go­ti­a­tions with the Euro­pean Union get un­der­way and are in the fore­ground,” Mr Archer said.

The full 28 mem­bers of the Euro­pean Union mean­while showed growth of 0.4pc in the third quar­ter, also on par with pre­dic­tions. On a 12-month ba­sis, growth in the eu­ro­zone stood at 1.6pc.

Con­sumer prices in the eu­ro­zone, which dipped in and out of de­fla­tion­ary ter­ri­tory last year, rose a higher-than-ex­pected 0.5pc, the high­est since June 2014.

A sur­vey by Fac­tset had fore­cast in­fla­tion of 0.4pc for the pe­riod.

In­fla­tion, though at its high­est in over two years, re­mains very far off the tar­get level of near 2pc set by the Euro­pean Cen­tral Bank.

An­a­lysts fret­ted that core in­fla­tion, which does not ac­count for volatile en­ergy prices, re­mained very low and in­di­cated that con­sumers lacked con­fi­dence and were still re­luc­tant to spend.

The ECB has em­barked on an in­creas­ingly con­tro­ver­sial mon­e­tary stim­u­lus pro­gram to boost in­fla­tion and the econ­omy, which has yet to de­liver the in­tended re­sults.

Last month, Euro­pean Cen­tral Bank pres­i­dent Mario Draghi re­jected calls that the bank end now or scale back its mas­sive bond pur­chases as well as its su­per low in­ter­est rate pol­icy.

The ECB stim­u­lus scheme, known as quan­ti­ta­tive eas­ing (QE), in­volves the pur­chase of pub­lic and pri­vate bonds at the rate of 80 bil­lion euros per month, and is cur­rently set to end in March 2017.

Crit­ics, espe­cially in pow­er­ful Ger­many, have scorned the poli­cies, blam­ing them for some ma­jor prob­lems at Europe’s big­gest banks.

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