ECB's Latest Stimulus Fails to Lift Euro Area Business Expectations

ECB's Latest Stimulus Fails to Lift Euro Area Business Expectations

22 April 2016, 13:41
Roberto Jacobs
0
1

ECB's Latest Stimulus Fails to Lift Euro Area Business Expectations

According to the latest PMI data released by Markit on Friday, euro area manufacturing and services sector activity remained subdued in April. Data showed the eurozone composite PMI came in at 53, slower than the previous month and missing expectations for a reading of 53.2. The manufacturing PMI from the 19-nations bloc dropped to 51.5 in April, from 51.6 seen in March and missed estimates of a 51.7 figure. While the services sector grew modestly to 53.2 in April compared to the 53.1 booked in March, although missed forecasts of a 53.3 reading.

Data shows that the euro area growth failed to respond meaningfully to the European Central Bank’s latest round of stimulus. ECB President Mario Draghi had said yesterday that the stimulus the central bank unleashed in March is working and people must give it time to feed through.

“A failure of business expectations to revive following the ECB’s announcement of more aggressive stimulus in March is a major disappointment and suggests that the modest pace of growth is unlikely to accelerate in coming months.” said Chris Williamson, chief economist at Markit in London.

Eurozone inflation levels are far below the ECB target of about 2.0%, despite significant monetary moves by the central bank in March. The threat of deflation remains a constant worry for policymakers. However, strong CPI numbers out of Germany and France last week, the two largest economies in the bloc provide some encouraging signs. Also data released on Wednesday showed German PPI improved to 0.0%, ending a streak of seven straight declines.

Today's PMI readings are a flash estimate and could be revised either up or down when the final readings come at the end of the month. Nevertheless, PMI data suggests the pace of economic growth at the start of the second quarter is marginally weaker than the average seen in the first quarter, and slightly slower than the average seen last year. The PMI is signalling GDP growth of just 0.3% at the start of the second quarter, broadly in line with the meager pace of expansion seen now for a full year. The single currency was subdued post-PMIs, EUR/USD slips to session lows at 1.1255 where is was trading at 1030 GMT.

"Even more aggressive policy action may therefore be required to drive a more robust and sustainable recovery and reignite inflationary pressures.” notes said Chris Williamson.

The material has been provided by ifx_logo.gif



Share it with friends: