Executive Board member Benoit Coeure spoke out about the future of the eurozone economy as a new survey revealed activity among businesses fell to its weakest in more than four years in December. Business activity across the bloc fell from 52.7 in November to 51.1 in December, inching it closer toward the 50 mark. The benchmark number of 50 is the barrier between growth and contraction, meaning anything below this line marks an economy on a downward trend. The figure, released in the IHS Markit’s Euro Zone Composite Final Purchasing Managers’ Index (PMI), was below a flash reading of 51.3.
The outlook dimmed as the composite future output PMI fell to a more than four-year low of 59.1 from 59.5.
That suggests the eurozone economy, which grew 0.2 percent – its weakest pace in four years – in the third quarter of 2018, is likely to slow further this year.
The pessimistic figures only add to recent woes for the bloc, which has been hit by a glut of lacklustre economic data.
Italy has been at the forefront of weaker data out of the EU, with fears raised this of Rome being on the brink of recession after the nation’s manufacturing sector shrank for a third month in a row.
A recession is defined by economists as GDP falling for two consecutive quarters.
It was revealed earlier this week how eurozone manufacturing activity on the whole was revealed to have barely expanded at the end of 2018.
Manufacturing PMI fell from 51.8 to 51.4 in November, in line with the flash estimate.
Chris Williamson, chief business economist at IHS Markit, said: “The data are consistent with euro zone GDP rising by just under 0.3 percent in the fourth quarter, but with quarterly growth momentum slowing to 0.15 percent in December.”
That will be disappointing News for policymakers at the European Central Bank, who ended their 2.6 trillion euro ($2.95 trillion) asset purchase programme – one of the main sources of stimulus for the bloc’s economy – last month.
Addressing the data, Mr Coeure said ECB interest rates are set to remain at low levels as long as needed to bring inflation back to its target of 2 percent.
Speaking on French radio France Inter, he said: “The interest rates we set for the euro zone economy will stay at the current level … until at least after the summer of 2019 and as long as necessary
While Mr Coeure warned of the risk of a financial crisis erupting from the slowdown, he maintained the euro area was “strong” at a global level.
He added: “There is a slowdown because of worries about trade and there is still a risk of financial crisis.
“We must be very vigilant.”
Source : EXPRESS