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Euro zone business growth at 4-year high, France lags further

Euro zone business growth at 4-year high, France lags further

PARIS: Euro zone business activity accelerated at its fastest pace in more than four years last month, according to surveys that highlighted an ongoing divergence between laggard France and the other big economies in the currency bloc.

A generally upbeat set of surveys will provide some welcome news for the European Central Bank, although they still only point to modest third-quarter GDP growth considering near-zero interest rates and the ECB’s massive stimulus programme.

The data, which come as official numbers showed retail sales rose less than expected in July, point to growth of about 0.4 per cent in July-September, survey compiler Markit said. That rate is likely to be sustained in coming quarters, according to a Reuters poll on the long-term outlook a few weeks ago.

“The upwards momentum that the euro zone economy had has started to fizzle out, growth no longer seems to be accelerating,” said Nick Kounis, head of macro and markets research at ABN AMRO. “There is a significant and rising risk that the ECB takes further action, maybe as early as today’s meeting.”

Although most economists expect no policy change at the ECB’s meeting later on Thursday, many see a growing chance its trillion euro asset purchase programme will be eventually be extended beyond a planned completion date of September 2016.

Markit’s final August Composite Purchasing Managers’ Index (PMI) beat an earlier estimate of 54.1, settling at 54.3 – its highest level since May 2011. In July it registered 53.9 and has now been above 50, which denotes expansion, since July 2013.

Italian firms had their best performance since early 2011 and German growth strengthened. Spain’s PMI also soared but it was a different story in France, the bloc’s second biggest economy, where the composite PMI slumped to its lowest since the start of the year.