Euro-Area Economy Set to Gather Pace as New Orders Fuel Hiring

Prospects of faster economic growth in the euro area are increasing.

A gauge of new orders recorded by manufacturers and service providers in the 19-nation currency bloc in March rose to the highest level since 2011, testing the capacity of a number of companies, London-based Markit Economics said on Tuesday. Employment increased at the fastest pace in more than 3 1/2 years.

“Whether the euro-zone economy has achieved escape velocity to enjoy a return to a strong and sustainable recovery remains uncertain, but the region is certainly seeing its best growth momentum since 2011,” said Chris Williamson, chief economist at Markit. With quantitative easing “also set to provide a boost to the nascent recovery in coming months, the economic outlook is therefore brightening as we expect to see more upward revisions to growth forecasts for the year.”

The European Central Bank has completed its first month of large-scale asset purchases, and policy makers are already pointing to the positive effects. While risks to the economy remain on the downside even after the announcement of the 1.1 trillion-euro ($1.2 trillion) program, ECB President Mario Draghi has presented better forecasts and said on March 16 that there’s reason to “be optimistic about the outlook.”

A Purchasing Managers’ Index for the manufacturing and services industries rose to 54 in March from 53.3 in February, Markit said. While that’s below an initial reading of 54.1, it’s well above the 50 mark that divides expansion from contraction and the highest value since April 2014.

Although rates of expansion in Italy and France were modest, March was the second month in a row when economic activity rose in each of the region’s four largest economies, which also include Germany and Spain, according to the report.

The PMIs indicate growth of 0.3 percent for the euro area in the first quarter, said Williamson, adding that the “pace of expansion looks set to gather pace in coming months.”

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