Eurozone PMI data 'points to new recession'

Machine parts in German factory German manufacturing declined in August

The eurozone's economy is set to contract by 0.5%-0.6% in the July to September quarter, tipping it into its second recession in three years, a closely-watched survey suggests.

The Markit Flash Eurozone PMI Composite Output Index, which measures new orders in manufacturing and services, was 46.6 in August, compared with 46.5 in July.

A score below 50 indicates contraction.

Output declined in both the manufacturing and services sectors, Markit said in a statement.

This is the seventh consecutive month of contraction in the eurozone's private sector.

Rob Dobson, senior economist at Markit said: "The August Markit Eurozone Flash PMI reinforces the prevailing view of the economy dropping back into recession during the third quarter of 2012.

"Taken together, the July and August readings would historically be consistent with GDP falling by around 0.5%-0.6% quarter-on-quarter, so it would take a substantial bounce in September to change this outlook."

The eurozone's economy contracted by 0.2% in the second quarter of the year. A recession is generally defined as two consecutive quarters of negative growth.

Julien Manceaux, senior economist at ING, said: "The composite PMI still indicates a contraction of activity in the eurozone as a whole.

"In our view, this confirms that the decline in eurozone GDP [gross domestic product] in the second quarter is likely to be the first leg of a technical recession."

Public finances

Even Germany, the eurozone's strongest economy, showed an accelerating decline in output, with its Composite Output Index falling to a 38-month low of 47.0, down from 47.5 in July.

German blue-chip companies ThyssenKrupp and Opel are reducing working hours because of weaker demand, while Bosch has announced it is negotiating reduced working hours with its workforce.

The findings contrast with more positive news relating to Germany's public finances, which were back in the black for the first six months of the year, according to Destatis, the country's federal statistics office.

Germany's public accounts showed a surplus of 8.3bn euros (£6.6bn), about 0.6% of gross domestic product, thanks largely to record low unemployment figures.

But Germany's second quarter economic growth of 0.3%, down from 0.5% in the first quarter, could fall further if Markit's surveys prove accurate.

In France, decline in output slowed, with the composite PMI output index rising to a six-month high of 48.9.

However, some analysts saw glimmers of hope in the Markit figures.

Marie Diron, senior economic adviser to the Ernst & Young Eurozone Forecast body, said the data showed "signs of stabilisation" in the eurozone economy and "supports our view that, while probably shrinking further, the eurozone economy is not falling off a cliff".

She added: "The manufacturing surveys for both Germany and France showed better results for the manufacturing sector than last month."

US growth

Earlier, the HSBC PMI survey for manufacturing in China indicated that activity in the sector fell to a nine-month low in August.

The PMI index was 47.8 this month, compared with a final reading of 49.3 in July.

Some analysts said the data indicated that the Chinese government's efforts to boost the economy had not boosted firms' confidence.

Meanwhile, the PMI measure for US manufacturing indicated that the sector saw a slight improvement this month, with the index rising to 51.9 from 51.4 in July.

Markit said that despite the increase - the first for five months - weak export markets meant overseas demand for US goods was subdued.

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Features

  • NS Savannah, 1962Nuclear dream

    The ship that totally failed to change the world


  • Ed Miliband takes a selfie at a Cambridge hairdressersNo more photo ops?

    Why is Ed Miliband drawing attention to his public image?


  • Espresso cup7 days quiz

    Which city serves the strongest cup of coffee?


  • Glasgow 2014 quaichs and medalsQuaich guide

    What do the Scottish gifts given to Games medallists symbolise?


  • Malaysian plane wreckage in UkraineFlight risk

    How odd is it for three planes to crash in eight days?


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.