Economic forecast for EU out today

The European Commission will this morning publish its autumn economic forecast amid expectations that the European Central Bank (ECB) may consider an interest rate cut when its governing council meets on Thursday.

The economic forecasts, which are published three times a year, are a closely watched indicator of the health of the European economy and underpin the commission’s assessment of countries’ compliance with deficit targets.

The publication of the autumn forecasts comes a day after a number of economic indicators hinted at a recovery in the European economy, with Ireland in particular posting strong growth in manufacturing output.

PMI figures published yesterday showed that European manufacturing activity increased for the fourth consecutive month in October.

The Purchasing Managers’ Index rose to 51.3 last month, up from 51.1 in September in line with an earlier flash reading. Any reading above 50 indicates expansion.

While manufacturing grew in Germany, it contracted in France, the euro zone’s second largest economy.

Ireland was among the best performers, with manufacturing PMI rising for the sixth consecutive month to 54.9, boosted by an increase in demand in the US and Europe.

Figures released yesterday also showed an increase in car sales in Europe last month, with some of the bloc's largest economies – Germany, France and Spain – experiencing a rise in sales.

Six-week low
While the figures temporarily lifted the euro from a six-week low against the dollar, gains were tempered by expectations that the ECB may still cut interest rates at its governing council meeting in Frankfurt on Thursday.

With inflation continuing to fall across Europe there is expectation that the ECB may have to introduce more stimulus measures, though some analysts believe that an interest rate cut will not be announced until next month.

Peter O’Flanagan, of Clear Currency, said the euro still faced significant volatility ahead of Thursday’s interest rate decision, noting that recent euro zone data, such as unemployment figures, had been disappointing.