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Eurozone Economy ‘Stuck in a Rut’

Eurozone Economy ‘Stuck in a Rut’Eurozone Economy ‘Stuck in a Rut’

A survey measuring business activity in the eurozone shows the economy remains “stuck in a rut”, according to the company behind the report.

The eurozone purchasing managers index (PMI) fell to 52 in September, down from an initial estimate of 52.3. Anything above 50 indicates expansion, but at this level, Markit said, the overall picture is one of an economy struggling against multiple headwinds, BBC reported.

However, separate figures showed retail sales rose 1.2% in August from July. And compared with August the previous year, retail sales were 1.9% higher.

“It may be that retail sales were lifted in August by people determined to enjoy their summer holidays after a difficult year. There may also have been a boost to retail sales coming from squeezed consumers looking to make the most of the summer sales in some countries,” said Howard Archer, economist at IHS Global Insight.

Markit said that France saw solid declines in both manufacturing production and service sector activity. The contraction in Italy was centered on the service sector, as manufacturing output expanded.

On Thursday the European Central Bank (ECB) detailed plans to buy assets to boost the economy. Markit’s chief economist, Chris Williamson, said the latest PMI survey added to pressure for the ECB to expand its asset purchase plan.

Meanwhile the Chancellor George Osborne said the weakness in the eurozone was “probably the greatest immediate economic risk” to the UK. 40% of the country’s exports are destined for the eurozone.

He urged businesses to look further afield, to places such as Asia and South America.

“Too many of our small and middle-sized businesses have felt daunted about entering into export markets. That’s not the case for small and medium-sized companies for example in Germany,” he told the Institute of Director’s conference in London.

Meanwhile, another report said that the economic recovery across the 18-country eurozone proved to be even more subdued than previously thought during September, with France and Italy the chief culprits, a closely-watched survey found Friday.

Markit said its monthly purchasing managers’ index, a gauge of business activity, was at 52.0 points in September. That’s a 10-month low and down on the initial estimate of 52.3.

Markit reckons the figures point to growth of 0.2 to 0.3 percent during the third quarter. Though that would be an improvement from the zero growth recorded in the second quarter, economic activity is still way short of levels needed to make a dent in sky-high unemployment rates across the region.

Furthermore, Markit found a big disparity in economic performance across the region. In particular, it warned that the downturns in France and Italy, the eurozone’s number 2 and 3 economies, are getting more pronounced. The two countries are often accused for being slow in reforming their economies to make them more competitive.

Financialtribune.com