The introduction and result of Brexit vote had a serious impact on the economy of the Eurozone. The United Kingdom leaving the European Union will have a lasting impact on both the UK and Europe. Industry experts are happy to know that the Eurozone was more resilient than what they thought. In a surprising result, the private sector business of Eurozone showed significant growth. In fact, the growth was rapid that it reached a 6-year high in February. The surveys showed a significant boost in the private sector growth which will aid the development of Eurozone economy.
In another news, the inflation rate of Eurozone is not satisfactory. In fact, the inflation has gone further than the target set by the European Central Bank. This makes it difficult for the policymakers to introduce changes to the monetary policy. While the inflation rise demands a change in the monetary policy, the economic growth suggests that it must be left as such.
Purchasing Manager’s Index (PMI) is usually considered as a growth indicator and it increased from 54.4 to 56.0 in just one month. The optimistic fact about this growth is that the index remained flat since 2011 and the growth was not anticipated. The economic data from Germany showed a sharp decline in retail sales in January. However, the PMI index showed that the private sector market in the large European economies such as France, Germany, Spain, and Italy rose sharply in the past few weeks.
In the current situation, any growth in the European economy is welcome by the market watchers. Even though the economic growth can’t be considered rapidly increasing, it shows that the economy is significantly solid. Apart from the Brexit referendum, the European trade market is under threat due to the presidential challenges in France. Marine Le Pon, the anti-right leader was hoping to become the next president of France and it could influence the economy. However, the investors are not worried about it right now as they understood the resilience of the economy.
If the current pace of economic growth continues, the Eurozone economy could register 0.6% gain in the first quarter. This is far greater than the expectation of 0.4%. However, this prediction is based on the hope that the European elections don’t bring about drastic new changes. The economic growth experienced right now is due to the growth in all the 4 major European economies. The industry experts are happy because this growth is sustainable in the upcoming months.
The optimistic views on the economy have helped the European companies to grow independently. Several companies have raised their prices and as a result, the job market has also improved. The PMI employment index increased from 53.4 to 53.8, reaching its highest value since 2007.
Euro however lost against the dollar as the dollar was rallying high. This didn’t hinder the growth of the manufacturers who used the opportunity to benefit from the exports. As the dollar has started to remain steady, currency strategists predict the Euro to rise again.