Euro zone begins to stutter again
China posts more weak factory data
THE EURO area’s economic recovery stuttered in May as Germany lost momentum while weakness in China’s manufacturing industry persisted.
Markit Economics said its composite index of services and manufacturing in the euro zone slipped to 53.4 points from 53.9 in April.
While that’s above the 50 mark that divides expansion from contraction, it is less than the 53.9 forecast by economists in a survey.
A Chinese factory gauge came in at 49.1 points, missing the median estimate of 49.3.
Euro area growth accelerated to 0.4 percent in the first quarter, and Markit said its surveys indicated a similar pace would be achieved in the current three months.
Nevertheless, with global demand showing signs of faltering, the recovery in Europe isn’t yet assured even as it benefits from central bank stimulus and a weaker euro.
“The euro zone’s recovery lost some of its vigour in May,” Chris Williamson, the chief economist at Markit, said. “At the moment the extent of the slowing is not a major concern, but will no doubt be causing some nail-biting at the European Central Bank as policymakers await signs that quantitative easing is the panacea the region needs.”
Germany’s composite gauge dropped to 52.8 in May from 54.1 in April, with both the services and manufacturing measures declining.
France’s composite measure rose to 51 from 50.6 in April. The reading was in line with the median forecast economists surveyed.
Markit said its euro region survey suggested that growth could continue to soften in June, with the increase in new business inflows moderating for a second month. Weaker order-book growth was centred on services, with manufacturing reporting the strongest new orders in just over a year.
The euro was firmer against the dollar at $1.1126 at 5pm in Johannesburg.
Much cheaper
of Teunis Brosens, a senior economist at ING Bank in Amsterdam, said he remained “optimistic” on the euro region recovery.
“Despite recent increases, oil and the euro remain substantially cheaper than a year ago,” he said.
In China, the manufacturing project management index has been below the key 50 level for five of the past six months.
The government has escalated efforts to prevent a hard landing, adding fiscal loosening to monetary easing.
In the latest moves, it relaxed financing rules for local governments in a bid to boost demand for credit, while three interest rate cuts since November aim to lower borrowing costs.