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Financial News: Strong Growth In Eurozone Unlikely To End In

Strong Growth In Eurozone Unlikely To End In Near Future

11/29/2017 - 06:30:00 (RTTNews)

(RTTNews) - Eurozone economy is likely to maintain its strong growth in the near term on the back of solid expansions in services and manufacturing sectors, Christoph Weil, an economist at Commerzbank, said.

The Purchasing Managers' Index for the service sector surged again in November to 56.2 from 55.0 in October, data from IHS Markit showed on November 23.

The manufacturing PMI also climbed in November to 60.0 from 58.5 in the previous month, thus marking the highest level since April 2000.

In November, the services PMI, which has showed high correlation with the rate of change of GDP in the past, virtually made up for its moderate fall since May.

In the past, such high PMIs went hand in hand with a rise in real GDP of more than 3/4 percent on the previous quarter, Weil said.

Against this backdrop, our growth forecast for the closing quarter of 0.5 percent on the third quarter could prove too cautious, the economist added.

"The data make it easy for the ECB to justify its forced reduction of the bond buying programme in 2018," Weil said.

The ECB's hugely expansionary monetary policy is having more and more of a visible impact on the real economy, the economist said.

Besides this, external economic environment is still favorable.

Although recent euro appreciation is weighing on price competitiveness of companies producing in the euro zone, this negative effect should be offset by generally rising global demand, the economist said.

"This strong growth allows it to argue that the inevitable reduction of its asset purchases in 2018 is fundamentally justified; solid growth will push up inflation sooner or later," Weil concluded.

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