Eurozone manufacturing activity sees a resurgence |
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Thu, 03 Nov 2005 01:35
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Eurozone manufacturing is witnessing its fastest rate of increase in 13 months, as per a survey released on Tuesday. It endorses the European Central Bank's (ECB’s) belief that economic activity in the region is gaining momentum.
The 16 per cent fall in oil prices in the past two months is also cited as a reason for the pace of economic growth accelerating in 12 euro nations.
David Brown, chief European economist, Bear Stearns International in London said: “Business optimism is being fostered by softer oil prices and a weaker euro”.
European Central Bank President Jean-Claude Trichet hinted last month that interest rates may rise “at any time” to stem inflation.
In a meeting at Frankfurt on Thursday, ECB’s assessment of eurozone growth prospects are also likely to be taken in to account when the interest rates are set. It is expected by the financial markets that ECB would hike borrowing costs in the next few months, although many economists caution against such a decision.
The eurozone purchasing managers index (PMI), meanwhile, rose from 51.7 in September to 52.7 in October, bolstered by better exports. According to Royal Bank of Scotland and NTC Economics, it is the fourth successive month which has seen an improvement in business conditions.
Kevin Gaynor, senior researcher at Royal Bank of Scotland said that it "raises the likelihood of further output growth in coming months and, perhaps more importantly, has improved the outlook for employment".
The PMI showed conspicuous improvement particularly in the countries of Germany and Italy. Some analysts ascribe the improvement in exports to euro's decline against the dollar since the beginning of the year. Though in France, the index declined marginally, there was an indication in the activity expansion for the fifth consecutive month.
The ECB has left its main interest rate at 2 per cent for 28 months consecutively.
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Chorus for rate cut; CBI says it is opportune to do so 