Eurozone PMI suggests return to growth is ahead

03 July 2013 11:32  [Source: ICIS news]

LONDON (ICIS)--The finalised Markit Eurozone Purchasing Managers’ Index (PMI) composite output figure was 48.7 for June, up from May’s 47.7, indicating that the eurozone recession was easing at the end of the second quarter, Markit Economics said on Wednesday.

Though lower than the earlier flash estimate of 48.9, the figure showed that the rate of contraction in economic output was at a 15-month low, with manufacturing only slightly down, the financial information services firm added.

In a commentary on the latest PMI composite reading, Markit chief economist Chris Williamson said: “The sub-50 PMI reading for June indicates that the euro area recession has extended into a record seventh consecutive quarter.

“The survey is broadly consistent with GDP falling by 0.2% in the second quarter, similar to the decline seen in the first three months of the year.

“However, there is good reason to believe that the region is stabilising and on course to return to growth during the second half of the year.”

The most encouraging aspect of the PMI data was that the Spanish economy is now contracting at its slowest rate for two years while Italy, although still plagued by a weak services economy, was seeing business activity fall at the slowest pace since September 2011, Williamson said.

France’s downturn had likewise moderated to the weakest since last August, he added.

Spain’s PMI all-sector output growth index for June hit a 24-month high of 48.1, Italy’s a 21-month high of 47.0, France’s a 10-month high of 47.4 and Germany’s a three-month high of 50.4.

On the PMI scale, only figures above 50.0 indicate an expansion of output.

Williamson concluded: “The concern is that, with Germany barely growing, it remains difficult to identify any real growth drivers.

“This suggests that the pace of economic expansion for the region as a whole is likely to remain subdued until business confidence improves further and unemployment starts falling from its current, alarming record high of 12.2%.”

By: Will Conroy
+44 20 8652 3214

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