Employment recovers as eurozone growth at highest since 2011

6 January 2016

Jonathan Lopez

Economic growth in the eurozone accelerated in the fourth quarter of 2015, reaching a four-and-a-half year high while staffing levels rose strongly, analysts at Markit Economics said on Wednesday.

The final Eurozone Composite Output index, which compiles both manufacturing and services, stood in December at 54.3 points, up from November’s 54.2 points.

A figure above 50.0 points shows economic expansion.

On 4 January, Markit said the manufacturing sector in December had expanded strongly in most eurozone countries.

A depreciated euro and higher staffing costs, however, made input costs for eurozone’s companies higher, with average input costs rising at the quickest pace for four months in December.

Companies struggled to pass on the higher costs to customers though, with prices charged falling slightly for the third consecutive month in December, in line with the still low inflation recorded at 0.2% across the currency union during the month. 

“The expansion was broad-based, with December seeing activity rise across Germany, France, Italy, Spain and Ireland... the headline index has now signalled expansion for 30 successive months,” said Markit.

Underpinning the latest expansion of eurozone economic activity was a robust increase in incoming new business in December. This exerted pressure on capacity, leading to an increase in backlogs of work for the seventh month running and further job creation (the steepest since May 2011),” the firm added, noting that the increase in backlogs helped to buoy business confidence.

France, the second economy in the eurozone after Germany’s, remains a concern for the analysts. Its Composite Output Index stood in December at 50.1 points, barely out of the doldrums, representing an 11-month low.

Markit’s chief economist, Chris Williamson, said a stronger rebound in France is needed to help drive a “strong year of growth” in 2016 in the region as a whole.

“The eurozone economy starts 2016 on a solid footing and well placed to enjoy a year of robust expansion... it’s particularly encouraging to see firms taking on staff in increased numbers, suggesting that businesses are preparing for stronger demand in the coming year by boosting capacity,” said Williamson.

“However, despite the improvement, the survey data signal a modest 0.4% increase in GDP in the fourth quarter, which would mean the eurozone grew 1.5% in 2015. Given that we have seen almost a year’s worth of quantitative easing, there is a concern that policy is proving somewhat ineffectual.”

The European Central Bank (ECB) announced in January 2015 its quantitative easing programme to boost inflation, flooding the euro system with funds to encourage lending to households and business.

However, in December it announced an expansion of the programme before signs economic activity and GDP growth remained subdued.

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