Eurozone economy at six-month high

FRANKFURT: Eurozone economic activity unexpectedly accelerated at the fastest pace in six months in February, with services proving resilient as factories battled challenges, including the coronavirus outbreak.

The reading in a survey by IHS Markit comes a day after European Central Bank (ECB) president Luis de Guindos said the bloc’s relatively strong labour market and ultra-low interest rates are supporting economic growth.

That’s an echo of an argument long made by the ECB, that domestic strength is providing some buffer against global risks.

“The expansion is being led by welcome resilience in the service sector, ” says Chris Williamson, chief business economist at IHS Markit.

“But manufacturing is also showing encouraging signs of pulling out of the downturn that has plagued producers for over a year.”

In Germany, Europe’s biggest economy, a surprise jump in the factory purchasing managers’ index sent the euro higher, though the improvement was largely a statistical distortion that masked weakness in export demand and sentiment.The euro area’s composite gauge – a measure of private-sector activity – edged up to 51.6, signaling quarterly economic growth of about 0.2%. Manufacturing continued to shrink, though at a slower pace.

Investors responded by pushing the euro up 0.3% to US$1.0816.

The question is whether new risks will ultimately spark a broader slump that derails a weakened economy. — Bloomberg

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