Growth was uneven across eurozone countries, with Germany

The 19-country eurozone started the year with robust economic growth pace as new business orders helped labor markets gain momentum, a survey said.

But intensified inflationary pressures and growing political uncertainties were expected to weigh on, according to the survey.

The expansion was signalled by flask IHS Markit Eurozone Purchasing Managers’ Index (PMI) Composite Output, which registered 54.3 in January, one of the highest readings seen over the past five-and-a-half years.

The index reading above 50 indicates an expansion, while one below that level points to a contraction.

The January figure stood slightly down from the 54.4 in December but still suggested steady expansion, boosted by rising exports linked in many cases to euros’ recent depreciation.

The start of the year also saw the largest monthly rise in employment since February 2008. Hiring gained momentum in both services and manufacturing on the back of sustained growth of new orders.

Business activity growth slowed in the bloc’s powerhouse Germany but remained above the eurozone average. France, the second largest economy in the single currency area, saw the fastest growth pace since June 2011, according to Markit.

However, economists cautioned that price hiking would take the toll in the foreseeable future.

Inflationary pressures intensified further in January. Firms’ average input costs rose at the fastest rate since May 2011, with rates of increase accelerating in both services and manufacturing.

“With costs rising steeply due to higher commodity prices and the weak euro, while selling price growth remains subdued, margins are being squeezed to the greatest extent for over five years,” said Chris Williamson, Chief Business Economist at IHS Markit.

Meanwhile, concerns were raised as Europe is experiencing a surge in populism and eurosceptic across the continent. The protectionist sentiment was expected to grow as Brexit negotiation is scheduled to embark on in March and elections are due this year in France, Germany and the Netherlands.

The political risks were as well fueled by newly sworn-in United States President Donald Trump, who signed executive orders to withdraw from a flagship trade deal with countries in the Pacific rim.

The move would raise fears in the bloc that the landmark Transatlantic Trade and Investment Partnership, which is being negotiated by Brussels and Washington, will be put on edge due to Trump’s resistance.

“As headline inflation rises and political uncertainty damages investment, we still see growth slowing somewhat this year,” said Jennifer McKeown, chief European economist at the Capital Economics. Enditem

Source: Xinhua/


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