Weak growth in Germany, France renews risk of eurozone downturn
THE EURO-AREA economy risks a renewed slowdown.
A Purchasing Managers index for factories and services activity unexpectedly fell to 51.4 in November, the lowest in 16 months, from 52.1 in October, Londonbased Markit Economics said yesterday.
Economists surveyed by Bloomberg News predicted an increase to 52.3. A reading above 50 indicates expansion.
A composite measure for Germany also declined, while in China, a factory gauge dropped to a six-month low.
While unprecedented stimulus by the European Central Bank (ECB) will start to take effect in coming months, weak growth in Germany and France, and rising tension in Ukraine threaten the euro area’s modest revival.
The 18-nation economy expanded 0.2 percent in the third quarter.
The decline in the PMI numbers “raises the risk of the region slipping back into a renewed downturn”, said Chris Williamson, the chief economist at Markit.
“The deteriorating trend in the surveys will add to pressure for the ECB to do more to boost the economy without waiting to gauge the effectiveness of previously announced initiatives.”
Markit’s factory PMI for China fell to 50.0 in November from 50.4 in October, below the median estimate of 50.2 in a Bloomberg News survey.
In the euro area, the ECB will start buying asset-backed securities this week as part of stimulus plans that already include covered-bond purchases, longterm loans to banks and recordlow interest rates.
ECB president Mario Draghi said this month that officials have been tasked with preparing new measures to be deployed should the outlook worsen.
Inflation in the euro area was 0.4 percent in October, up from September’s 0.3 percent though still far from the ECB’s goal of just under 2 percent.
While Markit said companies continued cutting prices, a trend that has been under way since April 2012, the rate of decline slowed in November.
A gauge of manufacturing activity in the region fell to 50.4 in November from 50.6, the report showed, while a similar index for the services industry declined to 51.3 from 52.3 in October. – Bloomberg