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Euro zone growth shows December pick-up

Wednesday, January 06, 2016 - 01:40

The euro zone economy is set to start the new year on a solid footing with business growth in Germany and Italy accelerating to multi-year highs last month. But as David Pollard reports, calls for further easing from the ECB are unlikely to fade as firms continued to cut prices.

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Positive numbers from the euro zone point to a stronger start to 2016. But here in France, thoughts are still on the events of last year. These special editions of Charlie Hebdo mark the first anniversary of terror attacks against the magazine. Those - and the even deadlier attacks of November - still impacting the French economy. Service sector activity in December fell below the key 50 level that denotes growth - after 11 months of expansion. Jeremy Stretch is CIBC head of FX strategy. SOUNDBITE (English), CIBC, HEAD OF FX STRATEGY, JEREMY STRETCH, SAYING: "There are still concerns about France. I think that's the major concern to consider from the euro zone's perspective, looking through 2016 into 2017 as to how the French economy can recover and maintain a degree of growth trajectory." Low inflation is the other concern. Latest PMI data confirm a steady upward swing in activity - strong services helping pulling the composite reading up to a four-month high. German services are expanding at their fastest in nearly 18 months - Italy's at their fastest in six years. And firms across the zone are hiring at their fastest in nearly five years. But: they are also still slashing prices - the output price index below 50 for the third month in a row. With a headline CPI rate of just 0.2 per cent, the ECB still faces an uphill struggle to get inflation back to target. SOUNDBITE (English), CIBC, HEAD OF FX STRATEGY, JEREMY STRETCH, SAYING: "Certainly if we were to see any fragility coming through in the sentiment data into the early part of 2016, reflecting the falls we've been seeing in equity indices over the course of the last couple of sessions, then I think we can see the ECB once again being forced to consider additional action." Markit - which compiles this latest data - appears to share those worries. After a year of QE, it said, there was a concern that policy was proving 'somewhat ineffectual'.

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Euro zone growth shows December pick-up

Wednesday, January 06, 2016 - 01:40