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Positive Outlook for European Economy in January

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<a href='http://morningbiznews.com/en/search/European+economy'>European economy</a>

For all of us this January marked the beginning of the new 2014, but it may also be, as some hope, a new step forward towards the recovery of the still crisis-shaken eurozone economy.

January proved to be quite positive in terms of economic activity, which according to statistics, expanded at its fastest pace for the last two and a half years this month.

Even though the European Central Bank has voiced its concern about the appearance of deflation risks in the region, the strong economic data helped assuage those concerns, and also influenced the movement of the euro currency, which jumped on the data and ended one percent higher against the dollar at $1.368.

On another positive note, the PMI (Purchasing Managers’ Index) compiled by Markit, hit its highest level in the past 31 months in January – 53.2, up from its December level of 52.1, which is also above the 50 level, marking an expansion in activity.

Europe’s largest economy, Germany, led the bloc’s recovery with its own economic activity expanding at its fastest rate since June 2011. France, its second-largest economy, unfortunately, does not prove to be as successful with its economic activity still decreasing, but at least at a slower pace compared to the last few months. In the rest of the eurozone, activity was at its highest levels since February 2011.

The rate of unemployment also eased to its weakest level in the last 32 months, but unfortunately companies continue to reduce jobs, although it is at their slowest pace since 2011.

Banks are also showing their positive outlook for the European economic recovery by cutting their balance sheets at the slowest rate since the outbreak of the eurozone crisis, which is a sign of growing confidence towards the region’s economy.
According to Alberto Gallo, head of European credit research at RBS, the slowdown of deleveraging is a sign of growing investor confidence and shows that banks are raising capital rather than cutting loans, as the economy recovers.

On top of the positive outlook towards the European economy in the past month, at the World Economic Forum in Davos, it was concluded that despite the still existing danger of emerging markets being vulnerable to shock, the world economic outlook was brighter than it has been in several years.