Tagged as the largest national economy of Europe, Germany surprisingly showed a strong start of the second quarter after the release of the Purchasing Manager’s Index. The data came earlier today, which sent optimism towards the economic outlook of the European economy.
Markit's flash composite Purchasing Managers' Index (PMI) increased 54.7 in May from 53.6 in April.The The sub-index for manufacturing went up 55.2 while the PMI sub-index for manufacturing stood to its 5-month high of 52.4. The rising employment and low interest rates seemed to be the contributing factor of the growth.
European Central Bank
Economic growth in the euro zone was feared of slowing down prior to the policy statement and a forecast of the European Central Bank. ECB President Mario Draghi was probably still looking for the outcome of the measures in the first three-months of the year before suggesting further stimulus towards the attainment of the bank’s goals.
Meanwhile, ECB’s chief economist Peter Praet said that the bank was committed to implement a creative measure against the surprising economic turns in the Eurozone. Reiterating that the bank will always find the means within the scope of their mandate, Praet added that the policymakers have not felt hindered in their action by a lack of instruments and they are absolutely determined to avoid deflation.
In his interview, Praet also explained that they have seen in some countries some signs of de-anchoring in wage formation, but they haven’t concluded that inflation expectations are de-anchored.Moreover, the chief economist of the bank highlighted that very low inflation with economic sack is a dangerous cocktail and interest rates remains to be on its list.
Economists await for the next move of Draghi in the midst of the data regarding the business confidence and industry in the eurozone.Experts believed that the president of ECB might be too self-assured as the economy was seemed to be moving in the right path and he may give positive outlook on GDP and prices.
Last March, the central bank of Europe forecasted a euro-zone growth of 1.4 percent in 2016 and 1.7 percent for next year. Further, inflation rate was expected to jump 0.1 percent this year and 1.3 percent in 2017.
Also, the European Commission reduced the expected consumer-price to 0.2 percent and 1.4 percent.
European Union
In other news, European Union leaders are encouraged to modify the way they handle there recent economic and political issues of the country. During the Group of Seven (G-7) finance ministers' meeting last Saturday, Italy's Finance Minister, Pier Carlo Padoan said that many citizens are beginning to consider Europe part of the problem, rather than part of the solution. Padaoan pointed out that it's a major responsibility of the policymakers in Europe to provide a viable alternative which is possible and that the economic strategy in Europe has to be upgraded, and updated.
One of the political concerns raised in Europe was the decision of the United Kingdom if it would still be part of the country. Additionally, the country couldn’t still resolve the influx of migrants from North America and from the Middle East.