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Improving global growth boosts EU

International
Berlin - Euro-area unemployment fell to the lowest in almost eight years and a measure of manufacturing accelerated as factories in the region’s biggest economies benefited from improving global growth.

The average jobless rate declined to 9.5 percent in February from 9.6 percent in January. It’s been decreasing steadily from a peak of more than 12 percent in 2013 and is now at the lowest since May 2009.

Also, IHS Markit said its Purchasing Managers’ Indexes (PMI) for Germany, France and Italy all rose in March, helping to push its euro-region gauge to the highest since 2011. New export business increased in all three nations.

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Workers assemble an e-Golf electric car at the new production line of the Transparent Factory of German car maker Volkswagen in Dresden, Germany. The country had an unemployment rate of 3.9 percent in February. Photo: Reuters

The European Central Bank (ECB) has deployed unprecedented stimulus to rekindle growth and fuel inflation, and president Mario Draghi said last month that the decline in joblessness shows the success of the central bank’s 2.28 trillion euro (R32.53 trillion) bond-buying programme. He’s also cited the improvement in the PMI readings as evidence of the recovery’s progression.

“Those who had doubts about the equity of our asset purchase programme are being answered because the most equitable measure of all is to create employment and to decrease unemployment,” he said. Draghi has repeatedly urged governments to implement reforms to reduce structural unemployment and boost growth potential.

Read also: Unemployment eases in last quarter

The euro-area factory PMI rose to 56.2 points in March from 55.4 points in February, well above the 50 point level that divides expansion from contraction. Markit warned of potential inflationary pressure linked to the euro and rising commodity prices. Output-price growth strengthened in March and was close to a six-year high, while suppliers struggled to meet growing demand.

“Manufacturing is clearly enjoying a sweet spell as we move into spring, but it is also suffering growing pains in the form of supply delays and rising costs,” said Markit chief business economist Chris Williamson. “These delays send a warning signal about rising inflationary pressures, as busy suppliers are often able to hike prices.”

As of this week, the ECB is scaling down monthly purchases of public and private debt to 60 billion euros from the previous pace of 80 billion. But Draghi maintains that inflation is not yet self-sustaining enough to justify an end of extraordinary monetary support.

ECB chief economist Peter Praet endorsed that view yesterday, saying the new pace of QE purchases isn’t the start of the end. The bank wants a “more lasting transmission of stimulus”, he said.

The unemployment report from Eurostat showed that the lowest February jobless rate in the region - 3.9 percent - was recorded in Germany, while Spain registered 18 percent. In Greece, 23.1 percent were out of work in December. 

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