July 5, 2020

Euro Watch: German Growth Report Provides Glimmer of Hope for Euro Zone

PARIS — A report Friday provided Europe with the faintest glimmer of hope, suggesting the German economy was growing again, but analysts played down the possibility of any imminent exit from the morass in which the bloc has found itself.

A broad survey of euro zone purchasing managers by Markit Economics, a data and analysis firm, showed activity in December reached its highest level in nine months, at 47.3, from 46.5 in November. Economists had been expecting a level of about 46.9.

While an improvement, a level below 50.0 still signals contraction.

Germany’s output rose in December for the first time in eight months, the data showed, though only modestly, and output continued to fall in France.

Chris Williamson, Markit’s chief economist, said the data suggested that the euro zone output might have reached bottom in October. Still, he said the data were consistent with expectations that G.D.P. would contract again in the final quarter of the year.

The purchasing managers data gives economists early clues to movements in the business cycle, and is fairly well correlated with G.D.P. over time.

Purchasing managers subindexes, covering the manufacturing and services sectors, also showed the rate of decline slowing, though demand for new business continued to fall, Markit said, “indicating that companies continued to face steeply deteriorating demand for goods and services.”

The euro zone economy contracted by 0.1 percent in the third quarter from the previous quarter, after a second-quarter decline of 0.2 percent.

The economy has been hurt by weak global growth, as well as the budget cutting measures regarded as critical to winning the trust of financial markets.

The cost of those measures is visible in the labor market: Eurostat, the statistical agency of the European Union, reported Friday that the number of employed people in the euro zone declined by 0.2 percent in the third quarter from the second quarter and by 0.7 percent from the third quarter of 2011. Most sectors of the economy suffered, with a 1.5 percent decline in the construction sector dragging most heavily on employment.

Eurostat said last month that the unemployment rate in the euro zone hit to a record 11.7 percent in October.

Ben May, an economist in London with Capital Economics, predicted that euro zone G.D.P. would slide by 0.3 percent in the fourth quarter, or about 1.2 percent on an annualized basis. Further, he noted, “a quarterly fall in GDP of 0.5 percent or more is not out of the question.”

Holger Schmieding, chief European economist at Berenberg Bank in London, predicted that euro zone would begin to rise from recession in the spring, helped by the determination of the European Central Bank to use “all necessary means“ to defend the euro, “rock-bottom“ interest rates and less pressure on governments to enact painful austerity measures.

Separately, an inflation report Friday showed subdued price pressures in the euro zone. Euro zone prices rose 2.2 percent in November from a year earlier, slowing from a 2.5 percent rise in October, Eurostat said. On a monthly basis, prices fell 0.2 percent in November from October.

Article source: http://www.nytimes.com/2012/12/15/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss

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