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News Europe Eurozone business growth accelerates
Business growth in the Eurozone accelerated last month to its fastest pace since June 2011 according to Markit Eurozone Composite PMI data.
Chris Williamson, Chief Economist at Markit said: “The final PMI indicates that the eurozone economy grew at the fastest rate since June 2011, contrasting with the slowdown signalled by the flash reading. The survey suggests the region is on course to grow by 0.4- 0.5% in the first quarter, which would be its best performance for three years.”
Final February PMI data signalled an acceleration in the rate of expansion of the eurozone economy to a 32-month high, an improvement on the mild deceleration indicated by the flash estimate.
The final Markit Eurozone PMI® Composite Output Index came in at 53.3, up from 52.9 in January and the earlier flash posting of 52.7. The economic recovery in the euro area has now stretched to eight consecutive months, the strongest run of growth since the first half of 2011.
Manufacturers continued to lead the upturn. Production rose at a solid clip, despite an easing in growth from January’s high. Although growth in the service sector was modest in comparison, the rate of expansion was nonetheless a 32-month record.
Eurozone companies benefited from strengthening market conditions, as new business rose for the seventh straight month and at the fastest pace since May 2011. However,
this failed to translate into meaningful job creation, with staffing levels only negligibly higher than the previous month (although this was still the best outcome for over two years).
Companies indicated that competitive
pressures
remained a key factor undermining job creation. Many reported pressure to keep headcounts down to offset price discounting offered to stimulate sales, with average output charges having now fallen continuously since April 2012. Input prices rose for the ninth successive month, but the pace of inflation dipped to the lowest since last September. National data saw Germany replace Ireland at the top of the PMI output growth table. Economic activity in Germany rose at the steepest pace since
May 2011, underpinning solid job creation.
The recovery in Italy also gained traction, with output rising at the steepest clip for almost three years following a marked acceleration in new order growth. Levels of business activity and new orders in Spain, meanwhile, continued to recover, but at slower rates than in the prior month. France saw output fall at a sharper pace in February, as new orders suffered a further contraction.
On the jobs front, further losses were reported by France, Spain and Italy, as companies held down headcounts to boost competitiveness. All three nations reported reduced selling prices. The upturn in the eurozone service sector extended to
seven months in February. Business activity and new orders rose at accelerated rates which were the sharpest in the current sequence of recovery, as domestic markets improved in most of the nations covered. Companies also maintained a positive outlook, with business confidence staying close to January’s two-and-a-half year peak.
The Eurozone Services Business Activity Index rose to a 32-month high of 52.6 in February, up from 51.6 in January and above the earlier flash estimate of 51.7. All of the nations included in the survey made positive contributions to the upgrade of the final February index reading (compared with earlier flash data), with the largest shares provided by Italy and Germany.
FCA Publishes Latest Review of Sales Incentives at Retail
All the major retail banks have either replaced or made substantial changes to financial incentive schemes, which played such a major role in the mis-selling scandals of recent years, the Financial Conduct Authority (FCA) revealed this month.
In its latest review of incentives schemes,
the FCA found significant improvements at many firms of all sizes but identified a number of areas common across the industry where further work was needed.
The review found that around one-in-ten firms with sales teams had higher-
risk incentive schemes and appeared not to be managing the risk properly. The FCA finalised its guidance on financial incentives in January 2013 and has since been working with the industry, with most large and medium sized firms committing to further improvements following the latest review.
Martin Wheatley, chief executive of the FCA said:
“Eighteen months ago we gave the industry a wake-up call and it recognised that a poor incentive culture had helped push bad sales practice, which led to mis-selling.
“We’ve seen some good progress but it is going to take time to see whether the
changes firms have made to incentive schemes and their controls stick, and whether good beginnings are part of genuine cultural change. But consumers can be assured that this remains an area that we will be watching closely to ensure poor practice doesn’t return.”
The FCA has identified a number of areas on which firms should concentrate to better manage incentive schemes, in particular:
• checking for spikes or trends in the sales patterns of individuals to identify areas of increased risk;
• doing more to monitor poor behaviour in face-to-face sales conversations;
• managing the risks in discretionary
incentive
schemes and balanced scorecards, including the risk that discretion could be misused;
• monitoring non-advised sales to ensure staff who are incentivised to sell do not give personal recommendations;
• improving oversight of incentives used by appointed representatives; and
• recognising that
remuneration that is effectively 100% variable pay based on sales, increases the risk of mis-selling and managing this risk.
The FCA has committed to further work on incentives for retail sales staff. In addition