EUROZONE GROWTH SLOWSDOWN IN FINAL QUARTER

OF 2014

Jonathan Cable from Reuters notes how theeurozone finished the year with its worst quarter,in economic economics terms, of 2014. France andItaly continue to experience downturns while theeconomic engine of the region, Germany, did notperform as strongly as expected. The UnitedKingdom also experienced a lackluster final quarteras growth in the service sector slowed down to itsworst levels since the middle months of 2013. Similarly the service sector in Italy and overalleconomic activity in France shrank during the finalmonth of the year as indicated my Markit’sPurchasing Manager’ Indexes. Cable reports that concerns that the recent drop inoil prices may cause deflation in the eurozone havespurred many to ask the European Central Bank totake action. Concurrent with the trend the last fewyears, firms across the region cut prices this lastquarter.

Jennifer McKeown, from Capital Economics, notes howthe data from December does, in fact, demonstrate thethreat of inflation. This consumer price data will mostlikely cause the European Central Bank to buy sovereigndebt in the early months of this year. Mario Draghi, thepresident of the ECB, stated just last week that theorganization was prepared to take the necessary actionto combat the risk of inflation. The UK has yet to raise the interest rates from therecord low of .5%. In fact, only two of nine policy makersin England have voted to raise these rates so far. Therecent business surveys may prove unsettling forconservative finance minister, George Osborne.According to recent reports, the British sterling hasdropped to a year and a half low against the dollar. Cable reports that the data from Markit’s finalDecember Eurozone Composite PMI was compiled fromthousands of survey responses from companies acrossthe area. In general the December data wasdisappointing, but officials from Markit did point to the.5% GDP growth and indication that there was increasedwage growth in the final part of 2014. Alan Clarke fromScotiabank notes that the eurozone is “not in a badplace,” but did not keep up with the strong results of theearly months of 2014. Source: “Eurozone growth falters at end of 2014” byJonathan Cable