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PMI Data Adds To Growing Optimism In The Eurozone

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PMI Data Adds To Growing Optimism In The Eurozone

The euro continued to trade at $1.35 on Tuesday after Monday's economic data added to signs that the region's recovery is picking up speed. German elections also boosted the region's confidence after Angela Merkel was re-elected for a third time, something markets were hoping for.

The eurozone's services Purchasing Managers Index rose to 52.1 in September from 50.7 in August. Bloomberg reported that the bloc's service sector growth increased to its fastest in over two years, well above the 50 point mark that indicates expansion.

Related: Market Primer: Tuesday, September 24: Asian Shares Slip On Lack Of Economic Data

The region's manufacturing index fell to 51.1 in September, down from 51.4 in August. However, new factory orders rose which signaled that demand is picking up. Increasing demand will likely help with the eurozone's rising jobless rate, and data showed that payrolls declined the least since January 2012.

The PMI figures added to a growing string of data which shows the region's economy is getting back on track. The growth has been led by Germany, where services PMI jumped from 52.8 in August to 54.4 in September. Manufacturing PMI was not as impressive with a drop to 51.3 from 51.8.

Germany has long been an engine for the 17 nation bloc, so the country's election closing without any major surprises also helped maintain confidence in the region. Although Merkel won the election, she did not win a majority in Germany's lower house of parliament, which means she will need to partner with another party to form a coalition.

The eurozone's recovery has slowly gained momentum, however the European Central Bank has been careful to remain cautious about the recovery. The bank expects still expects a 0.4 percent economic contraction and foresees a measured increase in activity.

 

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