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Europe headed for deeper slump
Source: Agencies |
September 21, 2012, Friday
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Print Edition
Print Edition
EUROPE appears headed for a deepening economic recession despite a recent easing in market concerns over the three-year debt crisis, a closely-watched survey found yesterday.
Financial data company Markit said its purchasing managers' index - a gauge of business activity - for the 17-country eurozone fell to 45.9 in September from 46.3 the previous month.
The decline was a surprise as the consensus in the markets was for a modest improvement. Anything below 50 indicates a contraction in economic activity.
September's rate was the lowest in over three years and came despite an easing in the rate of economic contraction in Germany, the eurozone's largest economy.
The decline also highlights the scale of the challenge facing European policymakers as they seek to get a grip on the debt crisis and may fuel hopes the European Central Bank will cut its main interest rate further from the record low of 0.75 percent.
Over recent weeks, stocks in Europe have pushed up to multi-month highs, while the euro has reversed course and headed above US$1.30 for the first time since the spring.
Markets were driven by a series of apparent breakthroughs in European leaders' efforts to solve the debt crisis.
Most importantly, the ECB announced a new bond-buying plan that would keep a lid on the borrowing costs of countries like Spain and Italy. Expectations that countries would sign up for the plan, which comes with terms attached, have helped bring down bond yields.
But while markets may have improved, economic activity is still on the wane.
"The fall in the PMI in September is another reminder that the ECB's new asset purchase program is not an answer to all of the region's problems," said Ben May, European economist at Capital Economics.
Financial data company Markit said its purchasing managers' index - a gauge of business activity - for the 17-country eurozone fell to 45.9 in September from 46.3 the previous month.
The decline was a surprise as the consensus in the markets was for a modest improvement. Anything below 50 indicates a contraction in economic activity.
September's rate was the lowest in over three years and came despite an easing in the rate of economic contraction in Germany, the eurozone's largest economy.
The decline also highlights the scale of the challenge facing European policymakers as they seek to get a grip on the debt crisis and may fuel hopes the European Central Bank will cut its main interest rate further from the record low of 0.75 percent.
Over recent weeks, stocks in Europe have pushed up to multi-month highs, while the euro has reversed course and headed above US$1.30 for the first time since the spring.
Markets were driven by a series of apparent breakthroughs in European leaders' efforts to solve the debt crisis.
Most importantly, the ECB announced a new bond-buying plan that would keep a lid on the borrowing costs of countries like Spain and Italy. Expectations that countries would sign up for the plan, which comes with terms attached, have helped bring down bond yields.
But while markets may have improved, economic activity is still on the wane.
"The fall in the PMI in September is another reminder that the ECB's new asset purchase program is not an answer to all of the region's problems," said Ben May, European economist at Capital Economics.
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