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Euro-Area Economy Set to Pick Up as QE Plan Bolsters Confidence

Euro-area manufacturing and services expanded at the fastest rate in five months at the beginning of 2015 amid increasing new orders and employment.

A Purchasing Managers Index for manufacturing and services rose to 52.2 in January from 51.4 in December, London-based Markit Economics said on Friday. Economists in a Bloomberg News survey forecast an increase to 51.7. A reading above 50 indicates expansion.

Confidence in the euro area’s weak recovery has improved in recent months, and the European Central Bank took another step on Thursday in its fight to revive growth and inflation across the 19-nation region. Policy makers committed to monthly asset purchases of 60 billion euros ($ 68 billion) for a total of 1.1 trillion-euros.

Europe’s QE Quandary

“There’s good reason to believe the rate of expansion will continue to improve in coming months,” said Chris Williamson, chief economist at Markit. “The additional stimulus in the form of full-scale quantitative easing by the ECB should help to underpin a further improvement in confidence among households and businesses.”

A gauge of services activity rose to 52.3 from 51.6 in December, Markit said, while a similar index for the manufacturing industry accelerated to 51 from 50.6 the previous month, reaching a six month high.

Lower oil prices have begun to feed through to companies, helping to push down selling prices at the fastest rate in almost five years, according to the report. New orders grew the most in five months.

Still, the economy remains “fragile and susceptible to shocks,” Williamson said. The current PMI reading is in line with quarterly growth of 0.2 percent, he said.

Economists in Bloomberg’s monthly survey predict growth of 0.3 percent in the first quarter after an expansion of 0.2 percent in the previous three months.

To contact the reporter on this story: Alessandro Speciale, at [email protected]

To contact the editor responsible for this story: Fergal O’Brien at [email protected] Jana Randow, Jeff Black

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