The Eurozone consists of 19 states, all using the Euro. The benefits of the Euro to citizens travelling between states for business or pleasure are immediately evident: the same money is used in Portugal to Lithuania. For businesses trading within the bloc, the benefits mean that fluctuations of exchange rates (on raw materials and for finished products or services) have been eliminated and currency conversion charges are consigned to history. On the downside of the equation, the states that use the Euro have the same central bank interest rate (ECB) and therefore have limited monetary controls on their individual economies (this is counter balanced by being able to call on a central bank with very deep pockets and more muscle than any single member state could bring to bear).
When looking at Eurozone growth data, one must consider that it is an aggregate value based on the performance of 19 somewhat disparate economies and individual growth rates will cover a spectrum. With that said, the Eurozone seems set to post its best growth data for six years, according to the latest Markit PMI report.
The March PMI reading comes in at 56.7, rising from a February value of 56 (anything above 50 indicates expansion). Job creation (a lagging indicator of the economic cycle) is at its strongest level for nearly 10 years.
Growth was particularly strong in Germany’s and France’s service sectors with French expansion eclipsing German. Both nations will have elections later in the year, but business confidence in both nations remains strong. It remains to be seen if populism and nationalism in the West have past their high tide marks yet.
The positive economic data has fuelled debate as to whether or not the ECB may make a tentative start to normalising interest rates in the summer.