News Column

Recession Easing in Eurozone, Markit Survey Shows

June 20, 2013
euro notes

The eurozone's recession appears to be easing, with the smallest downturn in business activity in 15 months recorded in June, according to a key economic indicator released Thursday.

The London-based research group Markit said its closely watched Purchasing Managers' Index (PMI) for the region's manufacturing and service sectors rose for a third consecutive month to 48.9 in June, from 47.7 points in May.

Based on a survey of about 5,000 companies, the preliminary June index was higher than the 48.0 points forecast by analysts.

But the index failed to reach 50, the cutoff point below which economies are deemed to be in contraction.

Markit warned that, despite showing the smallest slowdown in activity since March 2012, the figure suggested that "the eurozone's recession will have dragged into a seventh successive quarter."

But Markit chief economist Chris Williamson was more optimistic about the future, saying: "At this rate, the region could stabilize in the third quarter and return to growth in the fourth quarter."

Analysts expressed cautious optimism at the preliminary figures.

"Today's PMI figures clearly reinforce hopes that the eurozone economy may soon embark on recovery and hence reduce the prospect of further monetary easing from the ECB (European Central Bank)," said Martin van Vliet, an analyst with ING Bank.

At the same time, he warned that "any further recovery later in the year is likely to be very slow and bumpy."

"The economy remains in a fragile condition and there is certainly a risk that it could relapse later this year," warned European economist Ben May of the Capital Economics research group.

The figures showed a strongly divergent trend between the eurozone's two largest members, with Germany seeing output rise for the second consecutive month while France "suffered another steep contraction," Markit wrote.

Marco Valli, the chief eurozone economist at UniCredit Bank, warned that recent flooding in Germany could have a negative impact on the final June figures.

Overall, Valli said that less austerity and lower inflation was allowing a gradual recovery in domestic demand, but warned that global developments could affect the eurozone's recovery.

"The external environment remains challenging, with weaker growth developments in China and some other emerging countries being broadly offset by improving dynamics in the US and Japan," Valli wrote.

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Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH

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