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Eurozone business growth remains weak


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Eurozone business growth remains weak

There was disheartening news for the European Central Bank as it was revealed that eurozone business activity expanded at a slightly weaker than expected pace in September.

The ECB is struggling to spur growth and its policymaker will not be happy with the latest surveys of thousands of companies across the region.

They show weak growth at best, even in Germany, Europe’s largest economy.

And that was despite firms continuing to cut prices; they were down for the 30th month in a row

In France, the bloc’s second-biggest economy, the services sector contracted after just two months in growth territory.

“Disappointed”

“The ECB will be disappointed. It’s got a big uphill battle on its hands and perhaps what the survey is saying is what they have done to date is not going to be enough,” said Chris Williamson, chief economist at Markit, which does the monthly research.

“Although they will want to wait and see what the ABS purchases do in terms of stimulating the economy, the danger is the longer you wait, the more entrenched the downturn becomes.”

The ECB surprised markets earlier this month by cutting benchmark lending and deposit rates further and said it would buy asset-backed securities and covered bonds.

Price pressure

As well as growth, the ECB wants to push up inflation. Consumer inflation in the 18 countries sharing the euro rose to just 0.4 percent year-on-year in August, slightly higher than July’s 0.3 percent but still far below the ECB’s 2.0 percent target ceiling.

According to the company surveys, firms cut prices again this month – although not as steeply as they did in August.

“Growth is only being achieved by price discounting across the region as a whole,” Williamson said.

with Reuters

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