Germany's private sector shrank for a third straight month in July in a second blow to Europe's largest economy after Moody's cut its credit rating to AAA with a negative outlook.
Economists say the German economy may head into recession later this year, as it is likely its GDP fell in the second quarter, and Tuesday's data points to another decline in the third quarter.
The Markit purchasing managers' index (PMI) for Germany fell to 47.3 this month from 48.1 in June. Any number below 50 means the sector is shrinking rather than growing, and a lower reading means the private sector is shrinking faster than before.
Chris Williamson at Markit told Reuters: "There's a pretty clear picture in Germany of conditions really deteriorating very markedly, especially in manufacturing and that's a symptom of domestic and export demand continuing to falter."
He expected German GDP to fall by 0.1% in the second quarter and said businesses would become more cautious as the eurozone crisis gets worse.
"That's going to cause them to cut back on investment and hiring so unless we see quite a significant turnaround in the broader political and economic environment, I can't see any way of turning around from a further contraction in the third quarter."
French PMI data suggested it too was falling into recession. The Markit PMI for France rose to 48 from 47.3 in June. Manufacturing activity fell to 43.6, way below analyst forecasts for a reading of 45.5 in June. Activity in the services sector, on the other hand, was at its highest since January, with a reading of 50.2.
Jack Kennedy, senior economist at Markit, said: "A resilient service sector performance compensated for a sharper fall in manufacturing output during July.
However, conditions clearly remain fragile, with the rate of job-shedding accelerating to the sharpest for over two-and-a-half years in July.
Faced with a weak economic climate both domestically and abroad, combined with ongoing uncertainty over the future of the eurozone, businesses are finding little reason for optimism at present."
Markit said the data suggested French GDP would contract by 0.4% in the third quarter, after an estimated 0.6% fall in the second quarter.
Overall, the eurozone's private sector shrunk for the sixth straight month in July, suggesting the region will fall back into recession, with the eurozone PMI reading at 46.4. Ben May, European economist at Capital Economics said the data "supports the view that the region as a whole is in the midst of a pretty deep recession".
He expects GDP in the currency bloc to fall by 1% this year and says there will be worse to come in 2013. "Needless to say, this will hinder the speed of fiscal consolidation in the region and is likely to lead the debt crisis to continue to intensify," he said.
guardian.co.uk
Economists say the German economy may head into recession later this year, as it is likely its GDP fell in the second quarter, and Tuesday's data points to another decline in the third quarter.
The Markit purchasing managers' index (PMI) for Germany fell to 47.3 this month from 48.1 in June. Any number below 50 means the sector is shrinking rather than growing, and a lower reading means the private sector is shrinking faster than before.
Chris Williamson at Markit told Reuters: "There's a pretty clear picture in Germany of conditions really deteriorating very markedly, especially in manufacturing and that's a symptom of domestic and export demand continuing to falter."
He expected German GDP to fall by 0.1% in the second quarter and said businesses would become more cautious as the eurozone crisis gets worse.
"That's going to cause them to cut back on investment and hiring so unless we see quite a significant turnaround in the broader political and economic environment, I can't see any way of turning around from a further contraction in the third quarter."
French PMI data suggested it too was falling into recession. The Markit PMI for France rose to 48 from 47.3 in June. Manufacturing activity fell to 43.6, way below analyst forecasts for a reading of 45.5 in June. Activity in the services sector, on the other hand, was at its highest since January, with a reading of 50.2.
Jack Kennedy, senior economist at Markit, said: "A resilient service sector performance compensated for a sharper fall in manufacturing output during July.
However, conditions clearly remain fragile, with the rate of job-shedding accelerating to the sharpest for over two-and-a-half years in July.
Faced with a weak economic climate both domestically and abroad, combined with ongoing uncertainty over the future of the eurozone, businesses are finding little reason for optimism at present."
Markit said the data suggested French GDP would contract by 0.4% in the third quarter, after an estimated 0.6% fall in the second quarter.
Overall, the eurozone's private sector shrunk for the sixth straight month in July, suggesting the region will fall back into recession, with the eurozone PMI reading at 46.4. Ben May, European economist at Capital Economics said the data "supports the view that the region as a whole is in the midst of a pretty deep recession".
He expects GDP in the currency bloc to fall by 1% this year and says there will be worse to come in 2013. "Needless to say, this will hinder the speed of fiscal consolidation in the region and is likely to lead the debt crisis to continue to intensify," he said.
guardian.co.uk
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