European economic rebound showing surprising strength

Europe's economic recovery is showing surprising strength, as key surveys of business activity and optimism hit their highest levels in years.

The data released yesterday hold out hope that the region is set to see a sustained and marked decline in its unemployment rate from the current 9.5 percent. And the good economic news could well add pressure on the European Central Bank to signal a withdrawal of its extraordinary stimulus measures.

One of the indicators the ECB looks at when assessing its policy stance is the monthly survey of business activity from financial information company IHS Markit. Once again, it was strong, with the purchasing managers' index, a broad gauge of economic activity for the 19 countries that use the euro currency unchanged at a six-year high of 56.8 in May.

The results are consistent with quarterly economic growth of 0.6-0.7 percent, higher than the first quarter's 0.5 percent growth. Chris Williamson, IHS Markit's chief economist, says the consensus forecast for second-quarter growth of 0.4 percent may prove "overly pessimistic."

Germany has been the main engine behind the region's recovery from recession which began four years ago. It's been buoyed by strong exports of its cars and machinery. Stronger consumer confidence due to low unemployment of 3.9 percent has also supported the recovery. However, for the region to really push on growth has to come from all corners and a run of surveys are pointing to a pick-up, particularly in France, the eurozone's second-largest economy.