Europe's recovery gathers pace despite Brexit, Catalan crisis

BRUSSELS: Europe's economic recovery is gathering pace despite the Catalan crisis and uncertainty around Brexit, with figures released Tuesday showing eurozone growth beating forecasts and unemployment falling to its lowest level since January 2009.
A day after economic sentiment in the eurozone hit its highest level in nearly 17 years, the EU's official statistics agency announced that the jobless rate in the single currency area fell to 8.9% in September, bettering analyst predictions.
The positive data come after the European Central Bank (ECB) announced last week it was starting to wind down the massive support it has given the 19-member currency zone to help it through the crises of recent years, in view of the "increasingly robust and broad-based economic expansion".
The EU's economics affairs commissioner, Pierre Moscovici, hailed the data as evidence of the "marked acceleration" of the recovery since the spring.
"It's good news because more growth means more investment and more jobs for European citizens," he told AFP.
Seasonally-adjusted gross domestic product (GDP) grew by 0.6% in both the eurozone and the EU as a whole during the third quarter of 2017, compared with the previous three months, and was up 2.5% on the same period last year.
Eurozone GDP has expanded by 1.9% since the start of the year — surpassing in just three quarters the European Commission's May prediction of 1.7% growth for the whole of 2017.
This comes despite serious concerns over Britain's departure from the EU, with exit negotiations almost deadlocked and fears growing that the UK could crash out with no deal in place, causing chaos for businesses on both sides of the Channel.
"Looking ahead, there are good reasons to expect the eurozone's upturn to continue and perhaps accelerate," Jennifer McKeown of Capital Economics said in a note, pointing to the uptick in business confidence and improvement in the European labour market.
Unemployment in the eurozone was down from 9.0% in August, while the figure for the EU as a whole was 7.5% — the lowest since November 2008, Eurostat said.
Inflation still off target
But in a worrying sign for policy-makers, eurozone inflation remains stubbornly low, slowing to 1.4 in October — well off the ECB's target of 2.0% — according to figures from Eurostat.
And underlying inflation, which excludes energy, food, alcohol and tobacco, is proving even more of a headache, dropping to 0.9%, its lowest level in five months.
"The tick down in headline inflation was widely expected as energy base effects are pushing the inflation rate down for the moment. The drop in core inflation is more notable," Bert Colijn, economist at ING bank, said in a note.
"Even though pipeline inflation pressures are slowly mounting, the 2% target is getting further away for now."
The ECB has taken extraordinary measures to push up growth and inflation in the eurozone in recent years, setting interest rates at historic lows, offering cheap loans for banks and hoovering billions of euros of government and corporate bonds each month.
But as the eurozone economy has picked up, calls have grown for the ECB to begin unwinding its ultra-loose monetary policies, as the Federal Reserve is doing in the United States.
The Frankfurt-based bank edged in that direction on Thursday, announcing it would halve its monthly asset purchases to €30 billion (RM147.77 billion) from January.
But with the stubbornly low inflation figure in mind, ECB chief Mario Draghi last week also sought to reassure investors the era of cheap money was not over just yet. — AFP