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Eurozone economy stuck in sluggish growth

Article By: ,  Financial Analyst
January 6, 2015 4:26 PM

The eurozone economy registered weak growth in December, according to the Markit/CIPS survey. The region's composite purchasing managers' index (PMI) fell to 51.4 last month from an earlier estimate of 51.7. However, this was better than November's reading of 51.1.

Markit said its latest PMI survey suggested the eurozone economy grew by just 0.1 per cent in the last three months of 2014.

Persistently low inflation since the start of last year has raised the threat of deflation. The problem has been exacerbated since the summer by the falling price of oil.

In early Asian trading today (January 6th), US crude futures was trading at around $50 (£33) a barrel, the lowest level since April 2009.

Chris Williamson, chief economist at Markit, said the weakness of the latest PMI surveys would "add to calls for more aggressive central bank stimulus, including full-scale quantitative easing, to be undertaken as soon as possible".

He added: "The eurozone will look upon 2014 as a year in which recession was avoided by the narrowest of margins, but the weakness of the survey data suggests there's no guarantee that a renewed downturn will not be seen in 2015."

The euro tumbled as low as $1.1865 early yesterday, the lowest since March 2006, after the head of the ECB stated in an interview with German newspaper Handelsblatt that deflation was a threat and the central bank needs to be prepared to counter it. 

But the risk that the central bank will not be able to move inflation higher "has increased compared to six months ago (…) and the ECB is currently technically preparing to adjust the size, speed and composition of our measures at the start of 2015, should it become necessary," ECB president Mario Draghi said.

Many analysts expect the ECB to announce a bond-buying programme later this month.

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