European Business Activity Rises After Heavy Price Discounting

Price discounting drove growth in all of the euro zone’s major economies in March, helping business activity increase at its fastest rate for nearly a year, a survey showed on Tuesday.

New orders came in at their fastest rate since May 2011 and the survey found that companies have now been cutting prices for three years, although not as sharply in March as before.

Nevertheless, the Markit survey provided some welcome news for the European Central Bank (ECB) just weeks after it embarked on a trillion-euro asset-purchase program.

The private sector in Germany, Europe’s largest economy, grew at its fastest pace in eight months and although it also increased in France, the pace of expansion slowed.

Italy’s service industry returned to growth, fuelling hopes of an economic recovery there after years of on-off recession, and Spain’s expanded at its fastest pace since August.

“France is lagging behind a little bit but the others are doing pretty well. It just shows that quantitative easing was working even before the ECB bought a single bond,” Soctiabank’s Alan Clarke said.

“It’s vindicating the ECB for what it is doing.”

Official data showed euro zone consumer prices fell again in March as expected but that the decline was the smallest this year. Industrial producer prices declined by less than expected in February from a year earlier.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza