Euro zone growth weak in October, China services rally

Wed Nov 4, 2015 6:42am EST
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By Jonathan Cable

LONDON (Reuters) - Euro zone private business growth remained tepid last month but activity in China's services industry expanded at its fastest pace in three months, easing concerns about persistent weakness in its economy, surveys showed on Wednesday.

There was little sign the European Central Bank's massive stimulus program was boosting economic activity or price pressures in the bloc, and the survey showed firms returned to price-cutting last month to drum up trade.

"Broadly speaking the economy seems to be doing okay, but the real concern is that inflation remains subdued and it will take longer to get it back to target," said Ben May at Oxford Economics. "Against that backdrop, more policy action may well be appropriate."

The ECB, which wants inflation of just below 2 percent, has been injecting 60 billion euros ($65.54 billion) a month of new money through its bond-buying program since March to support growth and inflation in the 19-country currency area.

But with a slowdown in China and energy prices continuing to fall, ECB President Mario Draghi said on Tuesday policymakers would review the monetary stimulus and may beef up the program at the bank's next meeting in December.

Economists polled by Reuters last week said it was highly likely the bank would ease again, increasing or extending its stimulus program and further cutting the deposit rate, already in negative territory. [ECB/INT]

Beijing has also rolled out a flurry of support measures since last year to avert a sharp slowdown, including slashing interest rates six times since November 2014 and lowering the amount of cash banks must hold as reserves four times this year.

Such policies have been slower to take effect than in the past, however, and some economists expect Beijing to roll out more support in coming months.   Continued...

The headquarters of the European Central Bank (ECB) is pictured in Frankfurt, Germany, June 28, 2015. REUTERS/Ralph Orlowski