Euro zone economy hits 'speed bump' in February on rising prices: PMI

The euro zone's economic boom paused last month as rising prices took a toll on demand, but the zone remains on course for its best growth in eight years, a survey showed on Monday.

Growth was robust and broad, with countries across the region reporting expansion, welcome news to the European Central Bank as it looks to end its ultra-easy monetary policy.

HIS Markit's Final Composite Purchasing Managers' Index, seen as a good overall indicator of growth for the euro zone, fell to 57.1 in February from January's 58.8 and down from the flash estimate of 57.5.

January's reading was a level not seen since June 2006. But the slight slip last month leaves the PMI well above the 50 mark that separates growth from contraction.

"The euro zone economy looks to have hit a speed bump in February after a stellar start to the year. It's too early to read too much into the February fall in the PMI, and some pull-back from January's high was always on the cards," said Chris Williamson, chief business economist at HIS Markit.

Worldwide debt rises to record $226 trn - 3 times more than economic output

Worldwide debt has risen to a record $226 trillion - more than three times global annual economic output - and firms in more countries are struggling to service loans, a study shows, just as key central banks prepare to end super-cheap credit policies.

World markets are expected to get confirmation over the next week that normalising global interest rates from the extraordinarily low levels introduced to offset the fallout of the 2009 credit crash is no longer just a U.S. phenomena.

The European Central Bank will lay out cuts to its 2-1/2 year-old stimulus programme on Thursday, the Bank of England looks set to raise British interest rates for the first time in a decade, while the Fed is moving towards its third hike of the year.

Years of cheap central bank cash has pushed world stock markets to successive record highs. But another side effect has been explosive credit growth as households, companies and governments took advantage of rock-bottom borrowing costs.

Global debt now amounts to 324 percent of the world's annual economic output, the Institute of International Finance (IIF) said in a report on Wednesday.

One of the most authoritative trackers of global capital flows, the IIF report also highlighted "rollover" risks, especially in emerging markets that have borrowed in hard currencies such as euros and dollars.
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Catalonia, Spain and the economic consequences of a split

The prospect of Catalonia seceding from Spain has never looked closer. Following a messy referendum vote on the matter (which the Spanish government refused to recognise but sent police in to prevent from taking place) and a series of protests, there seems to be a real possibility of a split taking place. But what might the economic consequences be?

In terms of size and population, Catalonia is comparable to several European countries, such as Switzerland. Although it has 16% of the Spanish population, it generates 19% of Spain’s GDP and 25% of its exports. Its GDP per person is currently 14% higher than the EU average (but slightly below that of other regions of Spain such as the Madrid region, the Basque Country and Navarra). Meanwhile, the rest of Spain has a GDP per person of about 10%-15% below the EU average. Unemployment is also lower in Catalonia than in the rest of Spain, and similar to that of the region of Madrid.

This means that Catalonia, as well as the new Spanish state that emerges from a split, could be perfectly viable countries on their own. There would, of course, be economic consequences for both following a split – but this may be worse in the short-term than the long-term.
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ECB keeps policy, guidance unchanged

The European Central Bank reaffirmed its ultra-easy policy stance on Thursday, even keeping the door open to increasing bond purchases, dashing hopes it would formally signal its intent to claw back stimulus from next year.

The ECB kept rates at their record lows, confirmed that asset buys would continue at 60 billion euros ($71.76 billion) per month at least until December and said it could even increase or expand the asset purchases if needed, sticking with its long-held super easy stance.

The statement is likely to rattle some investors who expected the ECB to start laying the groundwork for a cut in monetary stimulus because growth is robust, the threat of deflation long gone and unemployment falling fast -- all supporting the case for removing at least some of the bank's extraordinary measures.

Investor attention now turns to ECB President Mario Draghi's 1230 GMT news conference, during which he may still offer at least some clues to the evolution of the bank's view on stimulus and will also detail new economic projections.

"If the outlook becomes less favourable...the Governing Council stands ready to increase the programme in terms of size and/or duration," the ECB said in a statement.

The euro remained roughly 0.5 percent higher against the dollar after the ECB's decision.
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Eurozone economy grows twice as fast as UK's for second straight quarter

The euro zone economy confirmed a robust expansion in the second quarter of the year, growing twice as much as Britain for the second consecutive quarter, preliminary estimates released by the European Union's statistics agency showed on Tuesday.

The reading confirmed the trend begun this year as the 19-country currency bloc consolidates its recovery while Britain starts to feel the negative impact of its decision to quit the European Union.

Gross domestic product (GDP) in the euro zone increased 0.6 per cent on the quarter, after a slightly downwardly revised 0.5 per cent rise in the first quarter, Eurostat's data showed.

In the March-June period, Britain's economic output grew by 0.3 per cent on the quarter, edging up from a sluggish rate of 0.2 per cent in the first three months of the year.

Britain's slowdown comes after the country showed robust growth last year, outgrowing the euro zone in the last three quarters.

The loss of pace coincides with the beginning of divorce talks with the EU in March and increased prospects of no access to the EU market after Brexit for Britain-based companies.

Meanwhile, the euro zone economy has picked up speed, bolstered by higher business optimism, strong domestic consumption and decreasing unemployment, which in June reached its lowest level since 2009.
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European Central Bank keeps easy money stance despite better growth

The European Central Bank left its ultra easy monetary policy stance unchanged as expected on Thursday, keeping rates at record lows and even leaving the door open to more asset buys if the outlook worsens.

After ECB chief Mario Draghi raised the prospect of policy tightening last month, he signalled that any policy tweaks would come only gradually, setting the scene for a possible discussion in September about a long-awaited tapering of its asset buys.

"We need to be persistent and patient because we aren't there yet, and prudent," Draghi told his regular news conference after a meeting of ECB policy-makers in Frankfurt.

He stressed that the bank's governing council were unanimous both on the decision to keep its guidance unchanged and to avoid setting a precise date for a discussion of future policy, noting only that it would occur in the autumn.

With the euro zone economy now growing for the 17th straight quarter, its best run since before the 2007-08 global financial crisis, that at least suggested the ECB is starting to contemplate easing off the accelerator, preserving some firepower after printing nearly 2 trillion euros to jump start growth.

The prospect of reduced monetary stimulus has kept financial markets edgy, with investors sifting through clues to gauge how big central banks around the globe will unwind unconventional policy that have kept borrowing costs at rock bottom.
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