Strengthening eurozone economic data has driven sharp rises in the euro over the past year. In the 12 months to the end of November the euro was up by 11% against the dollar and over 9% against the yen.
The eurozone economy has certainly gathered pace.
Growth jumped markedly in the fourth quarter of 2016, rising to 0.7% versus 0.4% in the prior quarter. The eurozone economy has since maintained decent growth, expanding 0.6%, 0.7% and 0.6% in the first, second and third quarters of 2017 respectively.
The European Commission expects the eurozone to grow by 2.2% this year, its fastest pace in a decade.
This forecast compares with the International Monetary Fund´s (IMF) prediction for 2.1%, a significant improvement on last year´s 1.8%. At the same time, the IMF expects eurozone growth to moderate to a 1.9% pace in 2018.
At the centre of the eurozone´s strong performance this year is Germany´s manufacturing sector. It´s export-orientated nature means the German economy tends to be a natural beneficiary of accelerating global growth.
This year, the world economy is set to grow by 3.6% versus the 3.2% pace of 2016, before accelerating slightly more to 3.7% in 2018, according to the IMF´s latest projections.
Data released today showed German factory orders beat expectations yet again in October, registering a third consecutive month of gains.
Germany´s October factory orders rose to 0.5% in October month-on-month, while September´s gain was upwardly revised to 1.2% from a prior 1% estimate.
Last week, the IHS Markit factory purchasing managers index (PMI) for the eurozone came in at a red hot 60.1 for November, up from 58.5 in the prior month. It’s the highest reading for the survey of activity in the eurozone manufacturing sector for over 17 years.
Eurozone inflation, however, has been disappointing forecasts of late. After jumping from a low of 1.1% in December last year, eurozone inflation reached a peak of 2% in February. It had fallen back to a low of 1.3% in June and July.
Inflation moderated to 1.4% in the year to October from 1.5% in September, well below the European Central Bank´s (ECB) 2% target.
Indeed, in September, the recent strength in the euro prompted the ECB to lower its inflation forecast for 2018, from 1.3% to 1.2%, due to the dampening impact that the strong euro is having on the prices of imported goods.
Over the past year, eurozone unemployment has dropped from 9.6% to 8.8%, its lowest level since early 2009.
While this is a move in the right direction, it´s still woefully high by international standards.
It compares with 2.8%, 4.1%, and 4.2% in Japan, the US and UK respectively.
At the same time, the varying rates of unemployment across the eurozone underline the huge economic disparity between some of its member countries.
Germany´s rate of unemployment is just 3.6%, comparing highly favourably with other major global economies.
Meanwhile, France appears an altogether different economy on this measure, with unemployment stuck at 9.8%.
It’s a horrible statistic, but there´s worse; Spain and Italy have unemployment rates of 17.1% and 11.2% respectively.