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Euro zone business activity posts weak growth

Business activity in the euro zone grew more than expected in December, according to a key economic survey, although the rate of expansion remained weak.

Euro zone December flash composite purchasing manager’s index (PMI) data from Markit – a closely-watched indicator of economic growth – came in at 51.7, just above analyst forecasts of 51.5 and November’s final reading of 51.1. A reading above 50 indicates that the sector has grown.

This was not enough to counter worries about economic stagnation in the currency region, however.

Jonathan Loynes, chief European economist at Capital Economics, said the data, “remain consistent with very weak or even negative GDP (gross domestic product) growth, underlining the fact that the euro-zone’s economic problems go well beyond the renewed troubles in Greece.”

If economic growth proves to be as weak as suggested by PMI figures, it may raise the pressure on the European Central Bank to launch a full-blown quantitative easing program – which would effectively pump cheap loans into the financial system.

This is a measure which would be frowned upon by many in Germany, the euro zone’s largest economy.

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