Euro­zone busi­ness ac­tiv­ity strong de­spite Brexit: sur­vey

The Myanmar Times - - International Business -

EURO­ZONE eco­nomic ac­tiv­ity edged higher in Au­gust with few signs that Brexit-linked dangers were yet hurt­ing the Euro­pean econ­omy, a closely watched sur­vey showed yes­ter­day.

Data mon­i­tor­ing com­pany Markit said the euro­zone econ­omy main­tained its re­silience de­spite Bri­tain’s shock vote to leave the EU, with a strong show­ing from France as well as pow­er­house Ger­many.

Markit said the pre­lim­i­nary Au­gust read­ing for its Com­pos­ite Pur­chas­ing Man­agers In­dex (PMI) for the euro­zone rose to a seven-month high of 53.3 points, up from 53.2 in July.

The PMI mea­sures com­pa­nies’ readi­ness to spend on their busi­ness and so gives a good idea of how the un­der­ly­ing econ­omy is per­form­ing be­fore of­fi­cial sta­tis­tics are com­piled and re­leased.

Any read­ing above 50 points in­di­cates the econ­omy is ex­pand­ing.

Markit chief econ­o­mist Chris Wil­liamson said the euro­zone econ­omy “re­mains on a steady growth path in the third quar­ter, with no signs of the re­cov­ery be­ing de­railed by ‘Brexit’ un­cer­tainty”.

Mr Wil­liamson said the bet­terthan-ex­pected Au­gust fig­ures sug­gested the euro­zone econ­omy was grow­ing at “1.2 per­cent [over 12 months], which is sim­i­lar to that seen on av­er­age over the first half of the year”.

The IMF said last month that euro­zone growth this year would hit a stronger-than-ex­pected 1.6pc, in­stead of the pre­vi­ously fore­cast 1.5pc.

The fund warned how­ever that growth in the cur­rency bloc would drop to 1.4pc next year as the Brexit ef­fects kicked in.

Howard Archer of IHS In­sight said the “PMI data are pretty re­as­sur­ing, sug­gest­ing that Euro­zone eco­nomic ac­tiv­ity is – for now at least – not be­ing ham­pered by the UK’s shock Brexit vote.”

Nev­er­the­less, the fig­ures “by no means give the all clear on Euro­zone growth prospects as there were mixed de­vel­op­ments”, in­clud­ing slow­ing em­ploy­ment and lower growth in new or­ders by busi­nesses, he added.

The pre­lim­i­nary Ger­man com­pos­ite in­dex fell to a still-strong 54.4 points. France’s PMI jumped to 51.6 points, the strug­gling econ­omy’s sharpest rise in 10 months.

The sur­vey will also in­flu­ence pol­icy at the Euro­pean Cen­tral Bank, which has sig­nalled that it could step up stim­u­lus if Brexit head­winds wors­ened.

“The ECB is still likely to ease [pol­icy] even­tu­ally, but re­silient PMIs should buy them more time un­til De­cem­ber,” said Fred­erik Du­crozet, econ­o­mist at Pictet Bank in Geneva.

ECB pres­i­dent Mario Draghi said last month that the bank was “ready, will­ing and able” to in­ter­vene if nec­es­sary.

“There cur­rently does not ap­pear to be a de­ci­sive case for Septem­ber ac­tion,” said Mr Archer. –

Photo: AFP

Euro­pean Cen­tral Bank chief Mario Draghi.

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