The latest economic data from the 17 countries that share the euro has shown that growth in the region is stronger than expected and inflationary pressures are continuing to increase, making another interest rate rise more likely, according The Wall Street Journal. On Tuesday, Markit reported that its flash reading of the eurozone composite index of manufacturing and services activity rose to 57.8 in April from 57.6 the prior month, which is the second highest reading since June 2007. The survey showed services expanding at the second-highest rate in three and a half years, while manufacturing groth was closer to a five-year high.
The strong purchasing managers index data “is consistent with gross domestic product rising at a quarterly rate of 0.8% during the second quarter,” which could boost confidence among policymakers that the economy is strong enough to support further fiscal tightening. The survey showed that prices rose for the ninth month in a row, with inflation nearing the all-time high level recorded in July 2008. The European Central Bank is now increasingly expected to raise interest rate in the coming months, with James Nixon of Societe Generale forecasting for a quarter-point rate increase each quarter. The ECB raised its benchmark interest rate for the first time since the financial crisis in April.
