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Eurozone economic slowdown steepens

By Francisco Míñana

Date: Thursday 21 Jun 2012

Eurozone economic slowdown steepens

The preliminary Purchasing Managers' Index (PMI) readings for June were released by Markit Economics this morning, showing that the European economy remains in recession territory.

The manufacturing and service sector readings remain below the 50 point threshold that indicates the crossover point between contraction and expansion.

The PMI manufacturing fell from 45.1 to 44.8, a 36-month low. However, the PMI services rose slightly, from 46.7 to 46.8. Finally, the PMI composite remained unchanged at a 35-month low of 46 points.

Looking at the preliminary PMI readings for European Union members for which data is available, we find that PMI manufacturing rose from 44.7 to 45.3 points and PMI services rose from 45.1 to 47.3 points in France.

In Germany, PMI manufacturing fell from 45.2 to 44.7, also a 36-month low. PMI services fell from 51.8 to 50.3 for a seven-month low but the reading remains above the 50 point level.

"The flash PMI for June rounded off the weakest quarter for three years, indicating Eurozone GDP is likely to have fallen by 0.6%. The downturn is gathering pace and spreading across the region, with Germany on course for a marginal fall in GDP [gross domestic product] in the second quarter, though far steeper declines are likely elsewhere – including an 0.6% drop in France," said Markit chief economist Chris Williamson.

Opinion:

Considering the latest PMI figures, the European economy is confirming the much feared return to recession. Since the summer of 2011, the Eurozone's economy has been rapidly slowing down.

The final readings will be released in a couple of weeks but the preliminary estimates tend to be accurate because they include 85% of survey respondents.

The PMI readings are negative for the euro and equities while positive for bond prices.


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