It seems the economic slump could worsen as July saw a contraction of euro-zone manufacturing and services output. This is according to today’s release of Markit Flash Euro-zone PMI data. ‘Flash’ Readings are based on roughly 85% of Monthly Replies.
London-based Markit Economics has estimated that a composite index (based on a survey of both industries purchasing managers) remains unchanged from June at 46.4 despite expectations of a 0.1 rise. A reading of below fifty signifies contraction, and the number has now been hovering below that level for six consecutive months. Meanwhile, the output index fell to a 38 month low of 43.6 from 44.7 and Manufacturing PMI hit a 37 month low of 44.1, down 1.0 from June.
Despite the Services PMI activity Index reaching a four-month high, the reaction to the data, and what it means for the euro-zone, has been pessimistic at best.
Howard Archer, chief European economist at IHS Global Insight, stated that ‘The purchasing managers surveys reinforce suspicion that the euro zone is headed for further clear gross-domestic-product contraction in the third quarter, [it] is having to cope with a serious tightening of fiscal policy in many countries, markedly rising unemployment, limited consumer purchasing power, tight credit conditions and muted global growth that is limiting export orders.’
In May euro-zone unemployment reached a record high of 11.1 percent. Now Markit Economics flash PMI data has revealed that for the seventh consecutive month employment has continued to fall across the euro-zone, dropping at the fastest speed for over two years. Although German employment levels fell only slightly, job losses have multiplied across euro-zone manufacturing and services, particularly in France.
Markit’s chief economist, Chris Williams, stated that the data suggests ‘things are getting worse. The overall picture of stabilisation is masking an increasing problem in Germany and the core is being increasingly affected by the debt crisis’.
This news comes as the economic futures of Spain, Italy and Greece become increasingly uncertain and Moody’s lowers Germany’s outlook to negative.