Wall Street Journal Blogs - International Report from Macro Horizons

WRAP: Europe seems well on the road to recovery. Services in most of the major economies are posting solid growth and retail sales are booming, thanks not least to long dormant German consumers. That Germany is a driver shouldn’t be a surprise. Inflation is low, unemployment is at multi-decade lows, wage settlements are rising, finance is fantastically cheap. Could this be the beginning of a German boom?

Global investors’ concerns now have to some extent shifted to Asia, where we got an improvement in China’s services purchasing managers’ index and slightly-higher-than-expected Australian GDP readout – both welcome, but not quite enough to set aside nagging worries of a protracted regional slowdown. There, the cycle of regional central banks easing monetary conditions is set to continue, with India surprisingly joining the fray Wednesday with a rate cut even though its economy is showing signs of recovery. (AM, MC)

EUROPE: February services purchasing managers’ indexes.

–EUROZONE was 53.7 against 53.9 forecast and 52.7 in January.

–FRANCE was 53.4 against 53.4 forecast and from 49.4 in January.

–GERMANY was 54.7 against 55.5 forecast and from 54.0 in January.

–ITALY was 50.0 against 51.3 forecast and from 51.2 in January.

–SPAIN was 56.2 from 56.7 in January.

–U.K. was 56.7 against 57.4 forecast and from 57.2 in January.

European services sentiment was generally positive in February, albeit not quite as bullish as some had anticipated, according to the latest purchasing managers’ indexes. Sentiment will have been underpinned by falling oil prices and the European Central Bank’s decision to launch quantitative easing. But with oil prices having found a floor, the former boost is likely to slow while it’s still an open question how much QE will actually boost credit flow. (AM)

EUROZONE: January retail sales rose 1.1% on the month against 0.2% expected and 3.7% on the year.

The eurozone is booming. Right? Retail sales in the single-currency region surged in January, led by strong German sales numbers. So what’s behind it? Certainly, some of the strength derives from falling oil prices. The eurozone is a substantial net importer of energy, so dropping prices acts as a windfall to these economies, giving consumers more spending power. And the European Central Bank’s decision to launch quantitative easing will have supported sentiment. But, undoubtedly, Switzerland’s decision to unpeg itself from the single currency also kicked sales higher in the single-currency region.  (AM)