Eurozone's Recovery Broadens -- Update

By Paul HannonFeaturesDow Jones Newswires

The eurozone's economic recovery is broadening to take in previously excluded parts of the currency area, according to surveys of purchasing managers, a development that would make it more straightforward for the European Central Bank should it decide to wind down its stimulus measures.

In a separate release, the European Union's statistics agency reported that retail sales rose for the third straight month in March, an indication that a rise in consumer spending helped drive robust economic growth during the first quarter.

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Figures released Wednesday showed the eurozone economy grew at an unchanged quarter-to-quarter rate of 0.5% in the first three months of the year. For much of the nearly four years of the recovery, it has been driven by Germany and a reviving Spain, with occasional spurts of activity in France. Italy, the eurozone's third-largest member, has played a minor role.

But that may be about to change, according to a monthly survey of 5,000 business conducted by data firm IHS Markit.

Its composite PMI for the eurozone--a measure of activity in the manufacturing and services sectors--rose to 56.8 in April from 56.4 in March, hitting a six-year high. The April reading was raised from a preliminary estimate of 56.7.

While Ireland and Spain continued to grow most rapidly among the eurozone's members, Italy experienced an April surge that took its measures to a near 10-year high. As a result, the measures of activity across the eurozone's three largest members were as close as they have been in the history of the surveys, which dates back to 1998.

"Italy is also seeing growth perk up, highlighting the increasingly broad-based nature of the current upturn," said Chris Williamson, IHS Markit's chief business economist.

Mr. Williamson said that for the eurozone as a whole, the April reading was consistent with quarter-to-quarter growth of 0.7%. If realized, that would be the currency area's strongest performance since the start of 2015.

A broadening of the recovery would be welcome news for the European Central Bank, which is expected to consider a reduction in its stimulus programs toward the end of this year. Although the central bank sets policy for the currency area as a whole, it is risky for it to decide on a change that could prove damaging to one of the larger members, since fresh difficulties there could spread.

Speaking Thursday, the ECB's chief economist hailed signs that the recovery is becoming more widespread.

"It is...comforting to see the euro area recovery broadening across countries, sectors and labor markets," said Peter Praet. "The dispersion in growth rates across both sectors and countries has...narrowed significantly and both are now at their lowest level since 1997."

Separately, Eurostat said retail sales rose by 0.3% in March from February, a stronger performance than the expected 0.1% rise. The rise in sales over the first quarter suggests consumer spending was a support to growth. Some economists had feared that a rise in energy prices during the quarter would weaken spending and the recovery.

Write to Paul Hannon at

(END) Dow Jones Newswires

May 04, 2017 08:42 ET (12:42 GMT)