Euro-area econ­omy set to pick up as QE plan bol­sters con­fi­dence

The Pak Banker - - 6BUSINESS -

FRANKFURT: Euro-area man­u­fac­tur­ing and ser­vices ex­panded at the fastest rate in five months at the be­gin­ning of 2015 amid in­creas­ing new or­ders and em­ploy­ment.

A Pur­chas­ing Man­agers In­dex for man­u­fac­tur­ing and ser­vices rose to 52.2 in Jan­uary from 51.4 in De­cem­ber, London-based Markit Eco­nomics said on Fri­day. Econ­o­mists in a Bloomberg News survey fore­cast an in­crease to 51.7. A read­ing above 50 in­di­cates ex­pan­sion.

Con­fi­dence in the euro area's weak re­cov­ery has im­proved in re­cent months, and the Euro­pean Cen­tral Bank took another step on Thurs­day in its fight to re­vive growth and in­fla­tion across the 19-na­tion re­gion. Pol­icy mak­ers com­mit­ted to monthly as­set pur­chases of 60 bil­lion euros ($68 bil­lion) for a to­tal of 1.1 tril­lion-euros.

"There's good rea­son to be­lieve the rate of ex­pan­sion will con­tinue to im­prove in com­ing months," said Chris Wil­liamson, chief economist at Markit. "The ad­di­tional stim­u­lus in the form of full-scale quan­ti­ta­tive eas­ing by the ECB should help to un­der­pin a fur­ther im­prove­ment in con­fi­dence among house­holds and busi­nesses."

A gauge of ser­vices ac­tiv­ity rose to 52.3 from 51.6 in De­cem­ber, Markit said, while a sim­i­lar in­dex for the man­u­fac­tur­ing in­dus­try ac­cel­er­ated to 51 from 50.6 the pre­vi­ous month, reach­ing a six month high.

Lower oil prices have be­gun to feed through to com­pa­nies, help­ing to push down sell­ing prices at the fastest rate in almost five years, ac­cord­ing to the re­port. New or­ders grew the most in five months.

Still, the econ­omy re­mains "frag­ile and sus­cep­ti­ble to shocks," Wil­liamson said. The cur­rent PMI read­ing is in line with quar­terly growth of 0.2 per­cent, he said.

Econ­o­mists in Bloomberg's monthly survey pre­dict growth of 0.3 per­cent in the first quar­ter after an ex­pan­sion of 0.2 per­cent in the pre­vi­ous three months.

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