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Eurozone recovery loses further steam in November

Like Japan, the 18-country eurozone faces the real prospect of sliding back into recession, a closely watched survey indicated Thursday, in an another downbeat development that's is likely to ratchet up the pressure on the European Central Bank to enact further stimulus

Pan Pylas (The Jakarta Post)
London
Thu, November 20, 2014

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Eurozone recovery loses further steam in November

L

ike Japan, the 18-country eurozone faces the real prospect of sliding back into recession, a closely watched survey indicated Thursday, in an another downbeat development that's is likely to ratchet up the pressure on the European Central Bank to enact further stimulus.

Financial information company Markit said its purchasing managers' index for the eurozone, a broad gauge of business activity, fell to a 16-month low of 51.4 points in November from 52.1 in October. Though anything above 50 indicates expansion, the survey suggests a recession isn't far away.

Markit's chief economist Chris Williamson said the decline "raises the risk of the region slipping back into a renewed downturn" and that quarterly growth in the last three months of the year is set to be just 0.1-0.2 percent. Figures last week showed the eurozone grew only 0.2 percent in the third quarter.

Once again, the survey showed France, Europe's second-largest economy, is a source of concern. Though last week's GDP data showed France growing a greater than anticipated 0.3 percent in the third quarter, that was largely due to government spending holding up, not the manufacturing and services sectors that Markit assesses in its survey.

Markit also found that growth in Germany, Europe's number one economy, has slowed to its weakest pace since the summer of last year, with demand stagnating. And though the rest of the region as a whole continues to outperform the two 'core' countries, Markit noted that even here the rate of expansion has cooled.

Analysts said the paltry pace of the eurozone recovery from recession over the past year and a half is likely to cement market expectations that the European Central Bank will do more to boost economic activity.

Earlier this week, ECB President Mario Draghi said outright purchases of government bonds remain an option for the bank. So-called quantitative easing, or QE, could help keep a lid on borrowing costs for businesses, households and governments as well as help reduce the value of the euro to the benefit of exporters.

"The survey confirms the continued weakness of the eurozone economy, which has spread from the periphery to the core, and clearly supports the case for further policy stimulus," said Jennifer McKeown, senior European economist at Capital Economics. (**)

 

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