April growth surge in Eurozone services and output
Published 20/04/2011 | 05:00
EUROPEAN services and manufacturing growth unexpectedly accelerated in April, suggesting the continent's economy is weathering rising energy costs and tough austerity measures.
Surveys of eurozone purchasing managers in both industries rose last month. Economists had projected a drop.
European companies have relied on faster-growing economies such as Germany and France to boost sales as governments from Spain to Ireland slash spending. Expansion throughout France's economy overtook that of Germany, hitting its fastest rate since September 2000 thanks to a spike in the services sector, the surveys show. German business confidence held close to a record high in March.
The eurozone "has entered the second quarter with significant forward momentum", said Martin van Vliet, an economist at ING in Amsterdam. The recovery "as a whole remains little affected so far by the combination of fiscal tightening, high oil prices, a strong euro and a lingering debt crisis."
The surveys suggest job creation hit a three-and-a-half-year high while the rate of inflation for eurozone goods and services is racing towards an all-time high this month. Prices charged by firms surveyed across eurozone showed "the largest monthly jump since the all-time high seen during the oil price peak of 2008", said Chris Williamson, chief economist with London-based researchers Markit.
Inflation accelerated to 2.7pc in the eurozone in March, the fastest in more than two years, adding pressure on labour unions to seek wage increases and companies pass on higher costs. It is even higher in the 27-nation EU at 3.1pc.
Some ECB council members have already signaled they favour raising borrowing costs further after increasing the benchmark rate by one-quarter percentage point to 1.25pc on April 7.
While businesses are sounding confident, ordinary citizens are less happy. Consumer confidence weakened more than economists forecast in April as surging energy costs sapped households' spending power and many governments cut spending to lower budget deficits.
An index of household sentiment in the 17-nation euro area fell for a second month to minus 11.4 from minus 10.6 in March, the Brussels-based European Commission said. That the lowest level since August. (Additonal reporting by Bloomberg and Reuters)