The Eurozone economy’s rate of decline has increased after European companies suffered their toughest month since June 2009, increasing fears that debt contagion has reached the heart of the region.
The Markit compiled Eurozone composite PMI fell to 45.7 in October from 46.1 in September, marking the ninth consecutive month below the growth indicating 50 mark. Worryingly for the Eurozone, the weakness that has crippled nations such as Greece and Portugal has now clawed its way into the regions powerhouses. The major economies of France and Germany both witnessed business activity shrinking at a quicker pace than last month.
“Sentiment is still being hit hard as companies worry about the dual impact of weak domestic demand and a slowing global economy,” said Rob Dobson, senior economist at Markit.
“Signs that the contraction in Germany gathered pace are particularly disappointing, given the important role a strong performing Germany could play in stimulating growth elsewhere in the currency zone.”
Economists are warning that if the PMIs fail to improve for November and December then the Eurozone economy will almost certainly face a heavy contraction in the fourth quarter and lay the foundations for 2013 being a very tough year.
” Ireland was the only real brighter spot in October, with growth improving as it continues to make up lost ground,” said Dobson, after its services PMI hit 56.1 in October, a sharp jump from 53.9 the previous month.
The Eurozone is expected to officially enter recession by the end of the year and with data continuing to disappoint the downturn could be extremely severe. Markit said that the latest PMI was consistent with the Eurozone shrinking at a quarterly rate of around 0.5%.
The PMI’s released today include;
The composite PMI showed that new business was revised upwards to 44.7 from 44.3 a rise on September’s level of 43.8 but still below the growth level of 50.
The employment index rose in October from 45.9 to 47.4 and the services PMI was revised downwards to 46.0 from 46.2. This means that services have not posted growth since July 2009.
As a result the Euro has fallen to its lowest level for eight weeks against the Dollar and speculation that Greece could struggle to secure the next round of bailout money, a situation that is putting the country’s position in the Eurozone in doubt, has not put the markets at ease. The single currency declined against all of its most traded peers after Greek Prime Minister Antonis Samaras vowed that the proposed wage and pension cuts will be the last. So far this year the Euro has weakened by 3.1%.
The Pound to Euro exchange rate is currently trading at 1.2488
The Pound to US Dollar exchange rate is currently trading at 1.5974
The Pound to Australian Dollar exchange rate is currently trading at 1.5305
The Euro to US Dollar exchange rate is currently trading at 1.2791
The Euro to Pound exchange rate is currently trading at 0.8006
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