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Business Activity Hits Its Highest Level Since April 2011, Shows Euro Zone PMI Data

Business Activity Hits Its Highest Level Since April 2011, Shows Euro Zone PMI Data
According to survey data released on Friday, there was cause to rejoice for Europe’s industry as the euro zone businesses grew during March at their fastest pace since April 2011.
Ahead of both February's reading of 56.0 and median consensus expectations of 55.8, the euro zone March flash composite PMI (purchasing managers' index) came in at 56.7. this index is a widely watched proxy for growth and the health of business activity.
Despite a recent rebound in inflation to around the European Central Bank’s(ECB)  target level of 2 percent in February, this buoyant figure clearly indicated that robust demand persisted during the month.
Chris Williamson, chief business economist at IHS Markit, was quoted as telling the news agency Reuters that the data also suggests that first-quarter GDP (gross domestic product) could come in at around 0.6 percent.
"There is a nice broad-based strengthening of the euro zone economy, this is a really solid rate of expansion. It's an economy firing on all cylinders," he added.
The ECB had announced that its policy of bond purchases were being planned to be extend to at least the end of 2017, albeit at a lower rate as of next month and the ECB is now into its third year of providing substantial monetary stimulus to Europe's markets in the form of bond purchases.
The ECB has been carrying out a very loose monetary policies which include negative interest rates in addition to the bond buying program which has now cumulatively purchased trillions of euros' worth of debt and the central bank has faced growing calls to move away from that monetary policies amid recent signs of renewed life in Europe's economy.
Stephen Brown, European economist at Capital Economics, does not believe the ECB will feel justified in acting too soon, even though on the overall, the report showed encouraging news for the region.
"While the output prices index increased further, there is still slack in the labor market and wage growth is set to remain subdued," Brown wrote in a note on Friday morning.
"As such, policymakers at the ECB are unlikely to be convinced that recent signs of a pick-up in activity will translate into sustained upward pressure on inflation," he concluded.

Christopher J. Mitchell

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