Eurozone edging closer to another recession

PMI, an indicator of economic activity, slipped a full point to a 16-month low of 51.1 in November

City Staff
Wednesday 03 December 2014 18:09
ECB President Mario Draghi
ECB President Mario Draghi

A day ahead of the European Central Bank's final policy meeting of the year, a closely watched survey indicated Wednesday that the 18-country eurozone is not far from sliding back into recession

Financial information company Markit said its purchasing managers' index, a broad gauge of activity across the manufacturing and services sectors, slipped a full point to a 16-month low of 51.1 in November largely on the back of subdued orders. The index is also down on the initial estimate of 51.4.

The index still points to modest growth as it's above the 50 threshold between expansion and contraction.

Markit reckons the eurozone is on course to record 0.1 percent quarterly growth in the fourth quarter, with Germany and France, the region's two biggest economies, the main reasons for the subdued performance. There were some bright improvements in Markit's survey, notably in Italy and Spain.

Since emerging from its longest-ever recession last year, the eurozone economy as a whole has failed to gain traction and is stuttering along at low levels of growth. That's one reason why the ECB is under increasing pressure to do more to boost economic activity and prevent low inflation from becoming an outright fall in prices.

Markit economist Chris Williamson warned there's a "strong likelihood of the near-stagnation turning to renewed contraction in the New Year" and that "more aggressive measures are likely to be needed, and quickly implemented, if another recession is to be averted."

Few economists think the ECB is ready to announce any new measures following its meeting Thursday but most expect its president, Mario Draghi, to hint that a further stimulus could be pursued early next year.

Separately, Eurostat, the EU's statistics office, showed retail sales across the eurozone rose by a monthly 0.4 percent in October, another sign of underwhelming economic activity.

Additional reporting PA

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