Weak growth in Ger­many, France re­news risk of eu­ro­zone down­turn

The Star Early Edition - - BUSINESS REPORT -

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

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