Data points to growth soon for euro businesses

THE COMBINED purchasing managers’ index (PMI) for the euro area, collected by Markit, yesterday noted the most positive economic outlooks for over a year.

The PMI, based on surveys of hundreds of businesses in both manufacturing and services, came in at 48.9. Any number below 50 suggests a contraction, but the numbers for June indicate the shallowest decrease in output since March 2012.

Manufacturing and services were at elevated levels, seeing 16 and 15-month highs respectively.

Though both are still suffering from the continent’s prolonged downturn, only a minor boost would now be needed to push both sectors into generally positive territory.

According to the survey, new business is declining at the slowest rate for five months, and backlogs of work declined over the month, though not enough to boost employment.

France and Germany, the two largest economies in the euro area, both registered an improvement in production.

Output from services and manufacturing in Germany stood at 50.9 for June, the highest in four months. Though French output still showed a significant contraction, at 46.8 it is at its highest point since 2012.

Consumer confidence figures, released by the European Commission yesterday, also suggested an improved outlook on the future.

Sentiment is still thoroughly negative, at -18.8, but improved from May’s reading of -21.9, and above the expected level.

Despite the negativity, confidence among consumers is now at an two year high, the strongest since back in August 2011.

Christian Schulz, senior economist at Berenberg, suggested that such positive data was a good indication that the currency union would soon leave its prolonged recession. “By and large, the currency zone remains on the right track. With the recession showing clear signs of fading, further progress in the fiscal adjustment will be easier, too”.

The Eurozone has been mired in recession for six quarters, and many analysts are suggesting that the area’s economy is likely to have continued to contract for a seventh quarter.

Chris Williamson, Markit’s chief economist, commented: “The survey data suggest that GDP is likely to have shrunk by 0.2 per cent in the second quarter, similar to the fall seen in the first three months of the year and extending the region’s recession”.