Euro zone economic recovery loses momentum in August - PMI - TheChronicleHerald.ca | Canada News Media
Connect with us

Economy

Euro zone economic recovery loses momentum in August – PMI – TheChronicleHerald.ca

Published

 on


By Jonathan Cable

LONDON (Reuters) – The euro zone’s rebound from its deepest economic downturn on record faltered in August, surveys showed on Thursday, with some countries in the bloc suffering more than others from restrictions imposed to limit the spread of the coronavirus.

Overall growth in the dominant service industry – which has been harder hit than manufacturing from lockdown measures – almost ground to a halt, suggesting the long road to recovery will be bumpy.

Last quarter the bloc’s economy contracted 12.1% as lockdowns led to businesses being shuttered and citizens staying home, official data showed.

A Reuters poll last month predicted a bounceback this quarter with growth of 8.1% but said a full recovery would take two years or more. [ECILT/EU]

But as infection numbers have risen some restrictions have been re-imposed, and IHS Markit’s final Composite Purchasing Managers’ Index, seen as a good gauge of economic health, suggested the economy was still floundering.

It sank to 51.9 last month from July’s 54.9 – close to the 50 mark separating growth from contraction, albeit slightly better than an initial flash reading of 51.6. The services PMI fell to 50.5 from 54.7, better than its flash reading of 50.1.

“The recovery is already cooling down a little bit and it is very uneven among countries. Some countries like Germany have performed relatively well and other countries like Spain and to a lesser extent France are sending more worrying signs,” said Daniela Ordonez at Oxford Economics.

While Germany’s services PMI fell, it nevertheless remained relatively healthy. French business activity growth also eased, with new orders stagnating as the euro zone’s second-biggest economy battled the disruption to trade caused by the pandemic.

On Thursday, the French government detailed its 100 billion euro stimulus plan to erase the economic impact of the coronavirus crisis over two years, lining up billions of euros in public investments, subsidies and tax cuts.

Meanwhile the services PMIs for Italy and Spain, both of which rely heavily on tourism, dropped back below the breakeven mark as travel restrictions put in place by many European countries have hit the summer season.

Greece’s economy, also largely reliant on tourism, contracted 14% last quarter, official data showed on Thursday.

In Britain, outside the currency union, the composite PMI was at a six-year high but job losses accelerated in a bleak sign ahead of the closure of the UK government’s coronavirus furlough scheme at the end of next month. [GB/PMIS]

WEAK DEMAND

Demand stuttered across the currency union, despite firms cutting prices, and headcount was reduced for a sixth month.

Inflation turned negative last month for the first time since May 2016, official data showed on Tuesday, and the composite output price index remained below the 50 line at 48.5. That was below a flash reading of 49.0 but above July’s 48.1.

The European Central Bank would like inflation just below 2% and has already bought record amounts of debt to keep borrowing costs down and support the economy.

ECB Chief Economist Philip Lane recently warned complacency risked entrenching low inflation and reducing price growth expectations, making it even more difficult for the ECB to deliver on its target. Some economists took his words as a hint the bank is preparing to expand stimulus even further.

“It depends on how inflation goes but it is reassuring the ECB is ready to act … and the pressure is increasing on the ECB to act,” Ordonez said.

That extra support may be needed as the new business index for the service sector fell below 50 to 49.8 from July’s 51.4.

(Reporting by Jonathan Cable; Editing by Hugh Lawson)

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

How will the U.S. election impact the Canadian economy? – BNN Bloomberg

Published

 on


[unable to retrieve full-text content]

How will the U.S. election impact the Canadian economy?  BNN Bloomberg



Source link

Continue Reading

Economy

Trump and Musk promise economic 'hardship' — and voters are noticing – MSNBC

Published

 on


[unable to retrieve full-text content]

Trump and Musk promise economic ‘hardship’ — and voters are noticing  MSNBC



Source link

Continue Reading

Economy

Economy stalled in August, Q3 growth looks to fall short of Bank of Canada estimates

Published

 on

 

OTTAWA – The Canadian economy was flat in August as high interest rates continued to weigh on consumers and businesses, while a preliminary estimate suggests it grew at an annualized rate of one per cent in the third quarter.

Statistics Canada’s gross domestic product report Thursday says growth in services-producing industries in August were offset by declines in goods-producing industries.

The manufacturing sector was the largest drag on the economy, followed by utilities, wholesale and trade and transportation and warehousing.

The report noted shutdowns at Canada’s two largest railways contributed to a decline in transportation and warehousing.

A preliminary estimate for September suggests real gross domestic product grew by 0.3 per cent.

Statistics Canada’s estimate for the third quarter is weaker than the Bank of Canada’s projection of 1.5 per cent annualized growth.

The latest economic figures suggest ongoing weakness in the Canadian economy, giving the central bank room to continue cutting interest rates.

But the size of that cut is still uncertain, with lots more data to come on inflation and the economy before the Bank of Canada’s next rate decision on Dec. 11.

“We don’t think this will ring any alarm bells for the (Bank of Canada) but it puts more emphasis on their fears around a weakening economy,” TD economist Marc Ercolao wrote.

The central bank has acknowledged repeatedly the economy is weak and that growth needs to pick back up.

Last week, the Bank of Canada delivered a half-percentage point interest rate cut in response to inflation returning to its two per cent target.

Governor Tiff Macklem wouldn’t say whether the central bank will follow up with another jumbo cut in December and instead said the central bank will take interest rate decisions one a time based on incoming economic data.

The central bank is expecting economic growth to rebound next year as rate cuts filter through the economy.

This report by The Canadian Press was first published Oct. 31, 2024

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending

Exit mobile version