Euro-Area Economy Starts Quarter in a ‘Low Gear,’ Markit Says

European Central Bank policy is helping to sustain growth in the euro area economy, though the pace is “tepid” and inflation remains too low, according to Markit Economics.

Markit said its composite Purchasing Managers Index was at 53 in April -- above the 50 level that divides expansion from contraction. A services gauge was at 53.1, with business confidence rising to a three-month high and growth in new orders accelerating.

The report suggests the 19-nation economy grew at an annual pace of 1.5 percent at the start of the second quarter. While expansion remains steady, there are signs that this is being partly fuelled by discounting, with a gauge of prices charged falling.

“The sustained euro-zone growth contrasts with slowdowns in the U.S. and U.K., suggesting the ECB’s more aggressive stimulus is helping,” said Markit economist Chris Williamson. Domestic demand “is picking up which, alongside the weaker currency, is helping to offset sluggish external demand.”

While inflation remains well below the ECB’s goal, policies including cutting interest rates to record lows, expanding bond purchases and starting an additional loan program for banks appear to be having an impact, according to Markit.

The biggest increases in services output growth were in Spain and Germany, Markit said. France returned to expansion following two months of contractions, and growth improved in Italy.

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