Eurozone business activity picked up more than expected in October. New service and business activity came in at the highest rate since April of this year. Business service gains were highest from member nations Germany and France.
The survey data comes a little more than six months after the European Central Bank embarked on a trillion-euro easing program in an attempt to boost inflation and growth, both of which have been stagnant in the European Union. The stimulus was geared towards facilitating business loans, therefore providing an influx of money to businesses to encourage spending and growth.
In addition, as consumer prices in the 19 countries of the eurozone dropped by 0.1 percent in September, the European Central Bank extended the $68 billion per month in spending for asset purchases. News of the positive business activity and statistics showing that inflation is on track provided some hope to the European Central Bank that their measures are headed in the right direction.
Although the news is promising, conflicting numbers show that the Eurozone recovery is still slow and tenuous. Just as things were starting to look up, other reports showed that companies had cut prices again in October, after holding them steady in September and increasing them for the first time in more than three years in late summer. The cost cutting means that consumer prices fell in the euro zone, almost offsetting any positive economic business activity.
The European Central Bank, whose goal is to keep inflation just below two percent, left monetary policy temporarily unchanged, according to reports from the most recent meeting.
The European Central Bank’s president Mario Draghi was quoted as saying after the meeting that the bank would reconvene in December to review what else it could do to address the threat of falling, weak prices. The European Central Bank’s governing council, which is comprised of an executive board and the heads of the European Union’s 19 central banks, would be in a better position to make a decision once it gets new inflation forecasts in December. Mr. Draghi asserted that any risks to inflation and economic growth were small, but his top priority.
“We are ready to act if needed … and we are open to the full menu of monetary policy,” Draghi said.“The Governing Council has tasked the relevant committee to examine the pros and cons of various measures … The attitude is not wait and see but work and assess.”
Falling inflation expectations which are driven partially by a lower-than-expected demand for oil, have led the central bank to consider a wider variety of possible measures, including an unpopular deposit rate cut to shore up inflation and keep it at the target levels of just under two percent. But his comments led to losses to the Euro, which fell almost two cents lower for its biggest loss in the last two months.