By: DailyForex.com
Strictly speaking, the latest Markit Eurozone Purchasing Manager’s Output index shows that output within the bloc showed a contraction with the index slipping from 45.8 to 45.7 for October, but it is kinder and more upbeat to regard it as a stagnation when compared to the previous survey. In these days of depressing economic news, it is good to spot the occasional silver lining. The index records expansion as a value above fifty and contraction as a number less than fifty. This month’s value showed that the contraction within the manufacturing sector had eased somewhat, but the service sector decline had become more pronounced giving an overall contraction figure which was in line with the previous month’s reading. Indeed, the sentiment within the business sector was at its most pessimistic since March 2009, according to Markit.
“The PMI suggests that the downturn is set to gather pace significantly in the fourth quarter. The final three months of the year could see GDP fall by as much as 0.5%. The eurozone economy continued to deteriorate at an alarming pace in November, and is entrenched in the steepest downturn since mid-2009,” Chris Williamson, chief economist at Markit said. The latest figures for economic output within the Eurozone showed that it had declined by 0.1% in Q3.
Speaking to the BBC, ING economist Peter Vanden Houte noted: “if you look at the services sector, we see that the PMI continues to fall and is now at the lowest level since 2009 and this is a reflection of extremely weak domestic demand and with the budgetary austerity continuing in Europe for sure, domestic demand is going to remain negative in the near future”.
Social and political factors are likely to combine to shift focus from the absolute priority of restoring deficits with the Eurozone (and wider EU) to convergence target levels (3% of GDP) as rapidly as possible, to a mixed strategy which pairs deficit reduction with policies which foster economic growth – and consequently employment.