• Home
• /
• Markets

Eurozone’s woes deepen

Deteriorating conditions across Europe suggested the downturn in the 17-country eurozone would accelerate over the last three months of the year, according to Chris Williamson, chief economist at financial data firm Markit.

Markit’s Composite Purchasing Managers’ Index (PMI) for the eurozone, which polls around 5,000 businesses across the 17-nation bloc, fell to 45.8 this month, its lowest reading since June 2009. The index has now been below the 50 mark that separates growth from contraction since February.

Things were a bit brighter in North America and Asia. A survey showed China was slowly recovering from its weakest period of growth in three years. While manufacturing contracted for a 12^th straight month, output hit a three-year high and order books were their most robust since April.

The outlook was a bit more tempered in the US. Its manufacturing sector managed to grow this month with Markit’s manufacturing PMI index edging up to 51.3, but falling overseas demand and uncertainty surrounding US elections and fiscal policy suggested the sector’s recent struggles would continue in the months ahead.

Many US companies have reported lower earnings for the quarter, hit by lack of demand and slower global growth.

Worries about Europe intensified after a survey of manufacturing in Germany, the eurozone’s biggest economy, in which the main index plunged by more than expected to 45.7 from 47.4.

The rate of decline was even worse in France and illustrated that a slump that began with a debt crisis in Greece had spread to the eurozone’s core economies.

In a separate report, Germany’s Ifo institute showed business sentiment in the country dropped sharply to its lowest in more than 2-1/2 years, the sixth consecutive monthly fall.

The eurozone economy contracted 0.2 per cent in the second quarter and is predicted to have shrunk 0.3 per cent in the third, meeting the technical definition of recession. Markit chief economist Chris Williamson said he expects an even greater contraction.

Bad news has been flowing out of Europe’s company boardrooms too. It was a different story for China, where the HSBC Flash Manufacturing PMI rose to a three-month high of 49.1 in October. “(This) adds to recent signs of stabilisation of the Chinese economy, thus underpinning our view that the slowdown in activity is bottoming out,” said Nikolaus Keis at UniCredit.