Today's data is showing that the manufacturing sector is still continuing its advance month one after the other, waiting for services that is due this week to give a complete picture about the performance of the economy's largest sectors in the first quarter of 2010.
PMI manufacturing rose in February to 54.2, the highest in 30 months, from 52.4 in January to continue its strong progress taking advantage of the euro's drop against the dollar, which reinforced demand on European commodities since they became cheaper relative to their American counterpart.
The 16-nation currency slipped more than 6% against the dollar since December, reaching its lowest in 9 months versus the greenback and one-year low versus the yen this month. Skeptics that Greece and other European economies' debt will impact recovery, reducing the appeal of the euro and encouraged investors to resort to refuges like the yen and dollar.
Expansion in manufacturing was largely driven by the growth witnessed in the largest economy in the region. German manufacturing climbed to 57.2, the highest since July 2007, in February from 53.7 in January. Apart from the euro zone, U.K.'s manufacturing dropped to 56.6 in February from 56.7 in January.
Despite the ongoing improvement in the sector, other data released since the beginning of the year is raising concerns that recovery may falter or at least be slow this year. However, the main focus now is on the huge budget deficit in Greece, which represents 12.7% of GDP far above the 3% ceiling set by the EU. Olli Rehn, EU Monetary Affairs Commissioner, is predicted to urge Greece today to do more in order to cut spending to rein in its huge budget deficit.
Fears are prevailing in markets after the vivid slowdown in growth seen in the fourth quarter, as the GDP slumped to 0.1% from 0.4% in the third quarter. The economy may suffer in the coming period with the gradual scale back in stimulus taking place by the ECB.
Trichet and his team, who predict growth to remain uneven this year, will meet on March 4 to set the interest rate and announce the end of the 6-month tender, as well as declaring the bank's new strategy for the second quarter, as revealed by Trichet in February's meeting.
On the other hand, unemployment is still high at 9.9% unchanged from December. High unemployment shows that company's despite announcing better-than expected earnings are still shedding employees to cut costs. In addition, it is impacting consumer spending who lost their income in the vast termination process undertaken by banks.
The European Commission said last week the euro-zone recovery may not strengthen till the fourth quarter of the current year and maintained its projection for 0.7% expansion in 2010.
