Euro Zone Stuck in Slow Growth, Despite Assurance from Draghi
Speaking at European Central Bank’s (ECB) monetary policy conference president Draghi assured several times the bank’s monetary policy is working and working through real economy. Maybe so, but for now data points that Euro Zone momentum is stuck in low gear, once again pointing that monetary policy has limited power to boost growth and needs to be accompanied by appropriate fiscal policies and structural reforms.
Benefits of weaker Euro is diminishing, as imports growth slows across globe, leaving little hope for export driven growth.
According to Markit Economics, Euro Zone manufacturing PMI dropped to 51.5 in April, short of 51.9 expected. Similarly services PMI came at 53.2, again below 53.3 expected by economists.
Central banks in developed world trying to boost growth through monetary policies, while current growth rate may be their potential. Even if U.S. grows 2%, it will still be adding around $350 billion to its economy, which is larger than many economies around the world.
International monetary fund, recently, in its spring meeting expressed concern on the trend of slower growth for so long, while FED is worried that monetary policy can do little in event of another recession.
Contrarian economists suggest central banks made it worse by artificially popping up asset prices and only prolonged the adjustments.