Euro zone economy sparkles

LONDON: If the latest surveys of business intentions are to be believed, the euro zone economy is sparkling, growing at a pace that easily explains the hints from some European Central Bank policymakers of a pull-back from their easy-money regime.

IHS Markit´s euro zone Flash Composite Purchasing Managers´ Index (PMI), an influential guide to the buying plans of businesses and hence growth, hit a near six-year high this month.  It climbed to 56.7 from February´s 56.0, its highest reading since April 2011 and better than any predictions in a Reuters poll.

At the same time, flash surveys for the currency bloc´s two largest economies -- Germany and France -- also stormed past expectations to register near six-year highs, conditions likely to play into elections in both countries this year.  "This is a really solid rate of expansion. It´s an economy firing on all cylinders," Chris Williamson, chief business economist at IHS Markit, said of the euro zone.

He added that it implied first quarter economic growth of 0.6 percent quarter on quarter, which would be the joint highest reading since the first quarter of 2011.One immediate impact may be to put pressure on the ECB to begin rolling back its historically easy monetary policy, a combination of zero to negative interest rates and a large asset-buying programme.

Earlier this month the ECB pledged to extend its bond-buying programme to at least the end of the year, citing weak underlying inflation and lacklustre growth in the euro zone.

It will, however, reduce its monthly spend from April. It also highlighted that it no longer felt a "sense of urgency" to take further action.

Since then some ECB policymakers, notably Austria´s Ewald Nowotny and Italy´s Ignazio Visco, have spoken of a rate hike within or just after the period of the bond-buying programme.