Eurozone growth edging higher at the start of second quarter

Gladys Abbott
April 21, 2017

That's the highest level since April 2011.

The euro-area recovery is gathering pace despite a looming election in France, which could result in a president who is openly hostile to the single currency.

Commenting on the "flash" PMI data, Chris Williamson, Chief Business Economist at IHS Markit said: "The survey responses indicate that some froth has come off the economy since the post-election bounce seen at the end of a year ago". "With numbers like these, people are going to start edging up their forecasts", said Chris Williamson, chief business economist at IHS Markit. Most forecasters have penciled in eurozone growth of between 1.5 percent to 2 percent for this year - IHS Markit's April survey, if sustained through the year, would point to something more like 3 percent.

Price pressures remained elevated, with both input prices and those charged for goods and services holding close to their six-year highs. The rise in employment that has accompanied the economic expansion is also shoring up the recovery by encouraging consumers to spend.

"By country, faster business activity growth in France - the strongest seen since May 2011 - was offset by a moderation in Germany, albeit with the pace of German expansion still running at one of the fastest seen over the past six years", a release added.

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"France's elections pose the highest near-term risk to the outlook, but in the lead-up to the vote the business mood has clearly been buoyant", Williamson said.

Although no major survey sees her winning, far right and anti-European Union leader Marine Le Pen is polling strongly.

European Central Bank policy makers remain reluctant to consider an early removal of the stimulus they have been providing to the recovery since mid-2014, expecting underlying inflation to build only slowly to their target as the recovery gradually reduces still-high rates of unemployment and other spare capacity. Retail sales fell and hiring slowed sharply in March, for example, but layoffs remained near a 45-year low, the number of open jobs rose and sales of previously owned homes touched a 10-year high.

The eurozone survey suggests that an acceleration in economic growth during the first quarter has continued into the second.

One major outcome of Britain's Brexit vote has been the sharp fall in the pound.

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