European August Services, Manufacturing Industries Slow More Than Forecast
Aug. 23 (Bloomberg) -- Edward Hadas of the Financial Times' Lex commentary team discusses growth in Europe’s services and manufacturing industries, which weakened more than economists forecast in August, signaling the pace of the recovery has peaked. Hadas talks with Jon Erlichman on Bloomberg Television's "InsideTrack." (Source: Bloomberg)(Source: Bloomberg)
Growth in Europe’s services and manufacturing industries weakened more than economists forecast in August, signaling the pace of the recovery has peaked.
A composite index based on a survey of euro-area purchasing managers in both industries declined to 56.1 from 56.7 in July, London-based Markit Economics said today. Economists expected a reading of 56.3, according to the median of 14 forecasts in a Bloomberg News survey. A reading above 50 indicates expansion.
Economic growth is likely to slow from the fastest pace in four years in the second quarter as a slowdown in the U.S. and China dim export prospects and the impact of austerity measures by Europe’s most indebted nations may crimp consumer spending.
“We are expecting a clear slowdown, albeit from a very dynamic pace earlier in the year,” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam. “The global manufacturing cycle has peaked, which will hit exports, and weak domestic spending will not offset that shortfall.”
The euro was little changed against the dollar after the data, trading at $1.2699 at 10:12 a.m. in London, down 0.1 percent on the day. German government bonds stayed lower after the report, with 10-year bund yields three basis points higher at 2.29 percent.
Growth in the euro area is spread unevenly, with Germany powering ahead and some other countries continuing to struggle. In Germany, the region’s biggest economy, gross domestic product jumped 2.2 percent in the second quarter from the previous three months, while France’s economy expanded 0.6 percent and growth in the Netherlands accelerated to 0.9 percent.
Spain’s Economy
Greece, which was forced to seek a European Union-led bailout in May, experienced a 1.5 percent contraction, while Spain’s economy grew 0.2 percent.
“The upturn continued to be all-too dependent upon France and Germany,” Chris Williamson, chief economist at Markit, said in a statement. “Growth in the rest of the euro area slowed to near stagnation, and services even contracted again as austerity measures bite.”
Thomas Quaas, chief executive officer at Beiersdorf AG, the German maker of Nivea cream, said on Aug. 5 that Europe remains a “challenging region” for the consumer business, singling out France, Spain and Italy as “difficult markets” for the company.
Overall, the euro area outperformed the U.S., which expanded 0.6 percent in the second quarter. And the world’s largest economy continues to cool, dimming growth prospects and adding to headwinds for the euro area.
Jobless Benefits
Claims for U.S. jobless benefits jumped to the highest since November and Philadelphia-area manufacturing shrank for the first time in a year, indicating the economy may be slowing faster than forecast, reports showed on Aug. 19. In China, industrial output grew the least in 11 months in July.
European Central Bank President Jean-Claude Trichet said on Aug. 5 that while third-quarter euro-area growth is “likely to be better than expected,” the ECB is “certainly not declaring victory, nor would we say that we’re in a period of active growth.”
To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net
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