Eurozone sees weak growth

CONCERNS over a faltering Eurozone recovery were stoked yesterday when forward-looking surveys pointed towards slower economic growth in the second half of the year.

The flash composite purchasing managers’ index (PMI) for the region, a closely-watched weathervane for wealth-creating activity, fell from 56.4 in May to 56 in June, its lowest level for three months. Although any reading above 50 indicates economic expansion, the dip will fuel fears that austerity measures enforced by a raft of European Union countries are beginning to impact on growth.

The Eurozone manufacturing PMI dropped slightly from 55.8 to 55.6, while the services PMI declined more dramatically from 56.2 to 55.4.

Despite the downwards movements, index provider Markit said the numbers supported the idea GDP in the region accelerated in the second quarter at a robust pace of 0.6 per cent to 0.7 per cent. Chris Williamson, chief economist at Markit, said: “Growth is led by manufacturing and, in particular, exports.”

Nick Kounis, chief economist at Fortis Bank, said spending cuts by governments would not fully bite until next year. He added: “The second quarter’s going to be pretty strong, but in the second half of the year we’ll see a clear slowdown. Growth is going to be sluggish.”

Elisabeth Afseth of Evolution Securities said the creep in yields on government bonds for countries such as Spain was more worrying than the prospect of weakening growth. Nations had to press on with forceful fiscal squeezes despite the feed-through to private sectors, she said.