Eurozone economic growth to be ‘steady but slow’

Economic growth in the eurozone will be steady but slow in the second quarter, surveys suggested yesterday, underlying European Commission concerns about the vulnerability of the currency bloc’s upturn.

Retail sales fell across the eurozone in March, and a price indicator offered no succour to the ECB in its struggle to stave off deflation.

The final composite Purchasing Managers’ Index from Markit, which usually gives a good steer on overall economic growth, was at 53 last month, just below 53.1 in March.

Both figures point to an expansion, though not a particularly dynamic one.

Although the eurozone economy grew at a faster-than-expected pace of 0.6% on the quarter in the January to March period, blowing past both the US and Britain, this may not be sustained in the current quarter.

A Reuters poll last month predicted 0.4% growth in April-June as the region is still weighed down by high debt, weak bank profits, high unemployment, and excess capacity in the economy.

The commission said in its economic forecasts on Tuesday that eurozone growth would be slower than previously thought, with subdued inflation this year, and warned of high external and internal risks to the bloc’s economy.

“Clearly the PMIs, as they have been for a while, suggest that the strength we saw in Q1 might well be a temporary phenomenon. April’s figures are consistent with that view,” said Ben May at Oxford Economics.

Activity in the bloc’s dominant services industry also remained muted. The services PMI held steady at March’s 14-month low of 53.1 in April.