Tags: Euro Zone Private Sector Growth Slows Sharply

Euro Zone Private Sector Growth Slows Sharply

Thursday, 23 Jun 2011 11:23 PM

The euro zone's private sector saw fairly tepid growth this month and without the support of Germany and France would have slipped back into contraction, business surveys showed on Thursday.

Growth in the bloc's dominant service sector was much slower than in recent months while manufacturers also applied the brakes as new orders declined for the first time in nearly two years.

The Flash Markit Eurozone Services Purchasing Managers' Index (PMI) fell to 54.2 in June from May's 56.0, its lowest level since December, and missing expectations for 55.5.

But it was the 22nd month the index, which measures the activities of companies ranging from banks to hotels, has been above the 50 mark that divides growth from contraction.

The flash manufacturing PMI fell to 52.0 from 54.6 in May, its lowest level since December 2009 and much lower than consensus expectations in a Reuters poll for 53.8, while the output index slumped to 52.4 from 55.2, the lowest since September 2009.

"There is a broad-based slowdown. When you strip out France and Germany from the euro zone numbers, the rest of the region slipped back into contraction," said Chris Williamson, chief economist at survey compiler Markit.

"It is a very worrying trend given that the periphery especially needs to grow as part of the debt reduction plans. There was growth anticipated there to bring in extra revenues."

Greece, Ireland and Portugal still face years of economic purgatory after being forced to go cap in hand for bailouts from the European Union and International Monetary Fund to stave off defaulting on their debts.

Euro zone governments are currently discussing a second bailout package for Greece and there are fears that any debt default by Athens would wreak havoc on other members of the 17-nation bloc.

The euro zone composite PMI, a broader measure of the private sector which combines the services and manufacturing data, fell to 53.6 from 55.8, well below forecasts for 55.1.

The composite index is often used as a guide to growth and Markit said it was consistent with quarterly growth of 0.6 percent for the second quarter. Economists polled by Reuters this month predicted growth of 0.3 percent this quarter.

Earlier data from Germany, Europe's largest economy, showed the pace of growth in its manufacturing sector slowed considerably but its service sector accelerated from last month's eight-month low.

Growth in both the French service and manufacturing sectors slowed from the previous month.

Order Flow Slows

The new orders index for manufacturers fell into negative territory for the first time since July 2009, when economies began to turn a corner.

The index sank to 49.6 from May's 53.3.

"The manufacturing sector is supposed to be driving the euro zone economy and if it is failing to do that then the service sector will weaken as well," Williamson said.

The service sector's new business growth was at its slowest since October, with the index slipping to 53.8 from 55.3.

Also worrying for firms, backlogs of work built up at a slow pace, with the composite sub-index just holding above the break-even point at 50.9, down from May's 53.0 and its lowest reading since October.

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The euro zone's private sector saw fairly tepid growth this month and without the support of Germany and France would have slipped back into contraction, business surveys showed on Thursday. Growth in the bloc's dominant service sector was much slower than in recent months...
Euro Zone Private Sector Growth Slows Sharply
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2011-23-23
Thursday, 23 Jun 2011 11:23 PM
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