Sunday, May 11, 2003

Eurozone Growth Worries Continue

According to the Financial Times there has been no 'Baghdad bounce' and growth expectations in the eurozone economies look as negative as ever. With the ECB meeting later this week a reduction in interest rates would be the logical thing, but the consensus seems to be 'no change'. Still we can always live in hope.

Manufacturing in the eurozone contracted at a faster pace in April, failing to get a lift from the end of the war in Iraq, a survey indicated on Friday. The Reuters/NTC purchasing managers' index for the eurozone fell from 48.4 in March to 47.8 in April. A score of 50 distinguishes expansion from contraction. The survey said the decline - which was worse than analysts' predictions - signalled the second consecutive month of deteriorating business conditions, at the fastest rate since January 2002. "The fall in the PMI reflected declines in order books, production, employment and stocks of purchases," it said. "The data suggest that no immediate bounce-back in growth was evident following the earlier-than-expected end to the war." Economists said the unexpectedly poor figures showed that an upturn in the eurozone economy was still some way off. They also showed that the 12-nation bloc was "crying out" for further interest rate relief, said one. The European Central Bank is expected to keep rates on hold at 2.50 per cent when it meets next week. But with domestic demand weak and a surging euro curbing exports, pressure is mounting for monetary easing sooner rather than later.
Source: Financial Times

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