Eurozone picks up pace as growth hits six-year high

16:22 | 22/02/2017 Cooperation

Economic growth in the eurozone is accelerating as businesses expand at their fastest pace in almost six years.

The German and French economies are picking up pace rapidly - Credit: PHILIPPE WOJAZER/AFP

Germany is growing at its fastest rate since 2013 while France is expanding more quickly than at any month since 2011, according to the purchasing managers’ index (PMI) from IHS Markit.

It also indicates that companies are hiring workers at the fastest pace in almost a decade, with the manufacturing and services industries both growing strongly.

“The eurozone economy moved up a gear in February. GDP growth of 0.6pc could be seen in the first quarter if this pace of expansion is sustained into March,” said Chris Williamson, chief business economist at IHS Markit.

“With inflows of new orders also surging and firms becoming even more optimistic about the year ahead, growth could even lift higher in coming months. The survey therefore indicates that companies are currently firmly focused on expanding in the face of rising sales and fuller order books.”

The composite PMI number for the eurozone climbed to 56 for February, up from 54.4 in January. Any number above 50 indicates growth.

France’s PMI hit a 69-month high of 56.2 - indicating it is now expanding more quickly than the eurozone average - while Germany’s index score rose to 56.1, a 34-month high.

It is the first time French growth has exceeded Germany’s since 2012.

The last time the PMIs were this high the European Central Bank hiked interest rates in a move which was widely blamed for derailing the economy.

The sovereign debt crisis followed, leading to another five years of mediocre economic performance.

But now the eurozone might be finding its feet once more, and economists do not expect the ECB to tighten monetary policy just yet as inflation remains low.

“Crisis legacies and low core inflation will prevent the ECB from turning hawkish any time soon,” said Holger Sandte at Nordea.

“However, the doves in the ECB Governing Council will find it harder to defend the current policy stance if core inflation unexpectedly picks up significantly during the coming months.”