Eurozone unemployment at lowest since 2009 as manufacturing activity shows more signs of economy in growth mode

Jasper Jolly
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The Eurozone economy is showing signs of accelerating (Source: Getty)

The Eurozone economy has shown further signs of heating up as unemployment hit seven-year lows and activity in the manufacturing sector expanded to six-year highs.

Unemployment dropped to 9.5 per cent in February, according to the European Commission, with a drop from 9.6 per cent to take it to the lowest level since May 2009.

Meanwhile the purchasing managers’ index (PMI) showed further expansion in the bloc’s manufacturing sector, with the reading moving to 56.2 in March, according to IHS Markit.

Read more: Fall in Eurozone inflation boosts dove Draghi

The expansion (denoted by a reading above 50) was driven by the fastest growth in manufacturing production and new orders since April 2011, when the Eurozone debt crisis stymied activity in the European economy.

The unemployment rate has reflected this gradual improvement, falling steadily from its peak above 12 per cent in early 2013. In February 2016 unemployment was still at 10.3 per cent, with the latest quarterly drop in the number of people out of work the biggest since September 2015.

The Eurozone economy has shown signs recently of finally gaining momentum in recent months, with the region boosted by the failure of populist anti-euro candidates to make significant breakthroughs in elections.

Read more: Is the Eurozone booming?

Chris Williamson, chief business economist at IHS Markit said: “Eurozone manufacturing is clearly enjoying a sweet spell as we move into spring, but it is also suffering growing pains in the form of supply delays and rising costs.”

The European Central Bank (ECB) has indicated it believes the threat of deflation is now behind the region as activity picks up. However, core inflation, which strips out the effects of more volatile products such as oil and food, remains stubbornly low.

Read more: Back on track: Eurozone economy grows fastest since 2011 as Germany booms

The ECB has indicated it will maintain loose control of the supply of money until annual inflation rises sustainably towards two per cent.

Sophie Tahiri, an economist at S&P Global Ratings, said: "What should help are better prospects for world trade after a very weak year in 2016, which are likely to support Europe's external demand."

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