LONDON (Reuters) -Euro zone business activity declined far more than thought in August with the slide in Germany particularly fast, while some inflationary pressures returned, surveys showed.
Wednesday’s purchasing managers’ indexes complicate matters for the European Central Bank which wants to control still rampant price rises without causing a recession.
It is expected to pause interest rate hikes in September, according to a narrow majority of economists polled by Reuters, despite elevated inflation. A further rise in rates by year-end remains on the cards, however, following the central bank’s most aggressive policy tightening cycle.
“The continuing sharp drop in the PMI data will test the ECB’s growth optimism,” said Mark Wall, chief European economist at Deutsche Bank.
“We are expecting the ECB to pause in September, but it is not clear that inflation is where the ECB wants it yet. A pause should not be misinterpreted as the peak.”
Activity in the bloc’s dominant services industry declined for the first time this year and the contraction in manufacturing output continued, although there were some signs of a turnaround for factories.
HCOB’s flash Composite Purchasing Managers’ Index (PMI) for the bloc, compiled by S&P Global and seen as a good barometer of overall economic health, dropped to 47.0 in August from July’s 48.6, its lowest since November 2020.
That was well below the 50 mark separating growth from contraction and lower than all expectations in a Reuters poll which had predicted a slight dip to 48.5.
A chunk of that activity was driven by firms completing old orders, with the backlogs of work index falling to its lowest since June 2020 when the COVID pandemic was cementing its grip on the world.
Business activity in Germany, Europe’s largest economy, contracted at the fastest pace for more than three years as a deepening downturn in manufacturing output was accompanied by a renewed contraction in services, an earlier survey showed.
Firms there remained pessimistic about the outlook as rising interest rates, customer uncertainty and high inflation continued to weigh on demand.
In France, the dominant services sector contracted further as falls in demand and new orders hinted there would be a contraction in the euro zone’s second-biggest economy this quarter.
Britain’s economy, outside the European Union, looks on course to shrink in the third quarter and risks falling into a recession as its PMI showed a slump in factory output and broader weakness in the face of higher interest rates.
Euro zone government bond yields and the euro tumbled after Wednesday’s data as traders bet the ECB may soon pause its interest-rate hiking campaign.
SERVICE SECTOR SLIDES
The euro zone services PMI sank as indebted consumers feeling the pinch from rising borrowing costs reined in spending.
Demand fell sharply as prices rising far faster than the ECB would like put off customers. The services output prices index remained elevated at 55.9, albeit the lowest since October 2021 and below July’s 56.1.
“Another weak PMI for the euro zone confirms a sluggish economy with recession as a downside risk. Inflation pressures for services remain stubborn as wage pressures continue to be a concern,” said Bert Colijn at ING.
“The latter adds to our expectations that the ECB’s hiking cycle is not over yet.”
Inflation was 5.3% in July, official data showed, more than double the ECB’s 2% target but well below readings seen late last year.
Manufacturing activity has been in decline since mid-2022, but the latest PMI survey offered some hope the nadir may have been passed. The headline index rose to 43.7 from 42.7, its first uptick in seven months and confounding expectations in the Reuters poll for a dip to 42.6.
Optimism among factory purchasing managers improved, also suggesting the worst may be over for manufacturers.
(Reporting by Jonathan Cable; Editing by Hugh Lawson and Toby Chopra)
VANCOUVER – Canada’s labour minister says striking grain terminal workers in Metro Vancouver and their employers have reached a tentative labour deal.
Steven MacKinnon announced the agreement between Grain Workers Union Local 333 and the Vancouver Terminal Elevators’ Association in a post on social media platform X, but provided no other details.
The union confirmed the tentative deal in a statement on Facebook, saying its members will conduct the ratification vote by Oct. 4.
The notification from the union also says picket lines were to be removed Saturday and members will return to work pending ratification, ending the strike that had paralyzed grain shipments from Metro Vancouver’s port.
The dispute had previously led to picket lines going up at six Metro Vancouver grain terminals on Tuesday as about 600 workers went on strike.
Canadian grain producers had urged a resolution in the dispute, noting about 52 per cent of the country’s grains moved through Metro Vancouver terminals last year en route to being exported.
Farmers say the strike, happening during crop harvesting, would result in as much as $35 million per day in lost exports.
The Western Grain Elevator Association said on Friday that talks had stalled after two days of negotiations this week, with the employer saying it had increased its offers to settle “outstanding issues.”
The employers group had said they’ve reached the end of their “financial ability to conclude an agreement that industry can absorb” with the last offer, and it was up to the federally appointed mediator to report the results to MacKinnon for the next steps.
MacKinnon says in his tweet that both parties put in “the work necessary to get a deal done.”
This report by The Canadian Press was first published Sept. 28, 2024.
TORONTO – Canada’s main stock index dipped lower Friday despite strength in energy stocks, while U.S. markets were mixed as the Dow eked out another record but tech stocks dragged.
The mood Friday was mixed after a strong week for equities in both Canada and the U.S., said Andrew Buntain, vice-president and portfolio manager at Fiduciary Trust Canada.
The S&P/TSX composite index closed down 77.01 points at 23,956.82, one day after it . It closed over 24,000 for the first time on Thursday.
The strength this past week wasn’t just in North American markets, noted Buntain, as Chinese stocks enjoyed a rally after the country’s central banks announced a suite of measures intended to boost the economy.
Meanwhile, an undercurrent of broadening strength continued this week as investors spread out their interest beyond a narrow set of tech giants, said Buntain.
“Some of the sectors that have been ignored for several years have been some of the better performers this year,” he said.
“We’re very encouraged by that.”
In New York on Friday, the Dow Jones industrial average was up 137.89 points at 42,313. The S&P 500 index was down 7.20 points at 5,738.17 after setting an all-time high on Thursday, while the Nasdaq composite was down 70.70 points at 18,119.59.
A report Friday on one of the U.S. central bank’s preferred measures of inflation — the personal consumption expenditures price index — showed continued cooling.
The Federal Reserve started lowering its key interest rate last week, and is expected to keep going this fall and into 2025.
However, the Fed’s next interest rate decision isn’t until November, noted Buntain, so there’s plenty of data for the central bank to take in yet — including next week’s labour report.
The job market has been an increasingly key focus for the central bank after recent reports showed cooling in that area of the economy. Friday’s report also showed consumer spending in August didn’t meet economists’ expectations.
In Canada, where the Bank of Canada is set for its next rate decision later in October, Friday brought a GDP report that was a little stronger than expected, said Buntain.
“The Bank of Canada has already delivered three cuts and signalled maybe some further reductions,” he said.
If inflation continues to move lower, Buntain added, the Bank of Canada could even announce an outsized half-percentage-point cut, echoing the Fed’s move last week.
The Canadian dollar traded for 74.08 cents US compared with 74.22 cents US on Thursday.
The November crude oil contract was up 51 cents at US$68.18 per barrel and the November natural gas contract was up 15 cents at US$2.90 per mmBTU.
The December gold contract was down US$26.80 at US$2,668.10 an ounce and the December copper contract was down four cents at US$4.60 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 27, 2024.
OTTAWA – Statistics Canada says real gross domestic product grew 0.2 per cent in July, following essentially no change in June, helped by strength in the retail trade sector.
The agency says the growth came as services-producing industries grew 0.2 per cent for the month.
The retail trade sector was the largest contributor to overall growth in July as it gained one per cent, helped by the motor vehicles and parts dealers subsector which gained 2.8 per cent.
The public sector aggregate, which includes the educational services, health care and social assistance, and public administration sectors, gained 0.3 per cent, while the finance and insurance sector rose 0.5 per cent.
Meanwhile, goods-producing industries gained 0.1 per cent in July as the utilities sector rose 1.3 per cent and the manufacturing sector grew 0.3 per cent.
Statistics Canada’s early estimate for August suggests real GDP for the month was essentially unchanged, as increases in oil and gas extraction and the public sector were offset by decreases in manufacturing and transportation and warehousing.
This report by The Canadian Press was first published Sept. 27, 2024.
