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Euro zone slows - but still on track?

Thursday, April 23, 2015 - 02:17

Europe's economy is back on track - or is it? Latest service and factory data disappoints, while Germany's train strike dampens the mood further. David Pollard reports on the new question marks hanging over the euro zone recovery.

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Germany: Europe's engine of growth. But hardly a train in sight. Commuters facing chaos as 3,000 drivers continue their pay strike. (SOUNDBITE) (German) TRAVELLER, GUIDO STRAUF, SAYING: "For us going on holidays today, it could have been really annoying because we could have missed our flight. We're lucky that we can take a Belgian train." Or perhaps not - Wednesday saw some Belgian transport slow to a halt amid a public sector strike there. While across the euro zone, it seems, everyone's waiting for the economic recovery to pick up speed. French business activity barely grew in April. A reading on its manufacturing contracting faster than expected - and crucially, still below the 50-point line that denotes growth. Germany's manufacturing is in positive territory - but by less than hoped for. While, overall, euro zone activity came in almost a full point below forecasts. CIBC's Jeremy Stretch. (SOUNDBITE) (English) CIBC, HEAD OF FX STRATEGY, JEREMY STRETCH, SAYING: "France continues to be the main source of concern as far as the euro zone is concerned. The lack of structural reforms, the still inherent weakness in terms of the majority of the range of indicators underlines that France remains the real laggard. And in a sense that's the real structural problem for the euro zone, that if the region is going to grow robustly over the medium to long term, it needs a strong heart, and that implies Germany but also to a lesser extent, France.'' On the plus side, Italy has posted a bounce back in industrial orders - prospects for a modest recovery there still alive as it struggles to shake off three years of recession. But there was more negative news too. Spain's jobless rate has risen slightly - and remains stubbornly high ahead of a general election where the economy's likely to be the main battleground. (SOUNDBITE) (English) CIBC, HEAD OF FX STRATEGY, JEREMY STRETCH, SAYING: "The other side of the coin, of course, is the rising political uncertainty that has been swirling around Europe in the course of recent weeks. That may well have had an impact on the margins in terms of these sentiment indicators .... But overall, I think we need to consider the data remains, outside of France at least, still in reasonably positive territory and I think that still suggests that the euro zone economy is on course for reasonable growth through 2015, assuming that political dynamics don't blow us off course.'' Europe's economic recovery still on track then. But like many of its trains, running a bit late.

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Euro zone slows - but still on track?

Thursday, April 23, 2015 - 02:17