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| France Puts Drag on Euro Zone Growth, Report Shows | France Puts Drag on Euro Zone Growth, Report Shows |
| (about 2 hours later) | |
| PARIS — The euro zone economy expanded in June for a 12th straight month, a private sector report indicated on Monday, but the pace of growth slowed amid signs that the French economy may again be shrinking. | PARIS — The euro zone economy expanded in June for a 12th straight month, a private sector report indicated on Monday, but the pace of growth slowed amid signs that the French economy may again be shrinking. |
| A broad index of economic output based on surveys of purchasing managers by Markit Economics, a data analysis firm based in London, came in at 52.8 in June, down from the 53.5 recorded in May and falling to the weakest pace since December. | A broad index of economic output based on surveys of purchasing managers by Markit Economics, a data analysis firm based in London, came in at 52.8 in June, down from the 53.5 recorded in May and falling to the weakest pace since December. |
| A number above 50 indicates expansion, while a number below that level suggests contraction. Economists see the surveys as providing one of the most timely indicators of the state of the euro zone economy. | A number above 50 indicates expansion, while a number below that level suggests contraction. Economists see the surveys as providing one of the most timely indicators of the state of the euro zone economy. |
| The data showed a glaring discrepancy between most of the currency bloc and France, where a broad-based slowdown appears to be underway, Markit said, with businesses shedding more workers at a time of already high unemployment. | |
| And German growth, while still strong by euro zone standards, appears to have slowed a bit. | And German growth, while still strong by euro zone standards, appears to have slowed a bit. |
| Markit said that outside of those two countries, growth was the strongest since August 2007. | Markit said that outside of those two countries, growth was the strongest since August 2007. |
| “If you take out France, the rest of the euro zone is showing improvement,” Carsten Brzeski, an economist with ING Group in Brussels, said. “France’s weakness has been evident for a while. It’s not in a deep recession, but there’s a severe stagnation.” | “If you take out France, the rest of the euro zone is showing improvement,” Carsten Brzeski, an economist with ING Group in Brussels, said. “France’s weakness has been evident for a while. It’s not in a deep recession, but there’s a severe stagnation.” |
| Mr. Brzeski said the latest data were consistent with second-quarter growth of about 1.2 percent on an annualized basis, up from the disappointing 0.7 percent annualized growth according to official figures in the first three months of 2014. | Mr. Brzeski said the latest data were consistent with second-quarter growth of about 1.2 percent on an annualized basis, up from the disappointing 0.7 percent annualized growth according to official figures in the first three months of 2014. |
| Europe has been growing slightly since the second quarter of last year, but there is little to celebrate. Unemployment in the euro zone is at 11.7 percent, near record levels. A group of economic experts last week argued that it was too early to say the recession in the bloc was over, considering the miserable state of the labor market. | Europe has been growing slightly since the second quarter of last year, but there is little to celebrate. Unemployment in the euro zone is at 11.7 percent, near record levels. A group of economic experts last week argued that it was too early to say the recession in the bloc was over, considering the miserable state of the labor market. |
| Emergency measures announced this month by the European Central Bank have only underlined the fragile state of the economy. | Emergency measures announced this month by the European Central Bank have only underlined the fragile state of the economy. |
| To combat deflation, the central bank’s president, Mario Draghi, announced a cut in the benchmark interest rate, cheaper loans for businesses, and even negative interest rates on the funds that lenders deposit with the central bank. | To combat deflation, the central bank’s president, Mario Draghi, announced a cut in the benchmark interest rate, cheaper loans for businesses, and even negative interest rates on the funds that lenders deposit with the central bank. |
| “The economy isn’t at the brink of disaster,” Mr. Brzeski said, “but it’s still not strong enough to make it without the tailwinds provided by the E.C.B. Hopefully that will set in in the second half of the year.” | “The economy isn’t at the brink of disaster,” Mr. Brzeski said, “but it’s still not strong enough to make it without the tailwinds provided by the E.C.B. Hopefully that will set in in the second half of the year.” |
| The global economy needs a European rebound. The United States economy actually contracted at an annualized 1 percent rate for the quarter, according to revised data last month. And the World Bank this month cut its outlook for global growth in 2014 to just 2.8 percent, from the 3.2 percent it had previously forecast. | The global economy needs a European rebound. The United States economy actually contracted at an annualized 1 percent rate for the quarter, according to revised data last month. And the World Bank this month cut its outlook for global growth in 2014 to just 2.8 percent, from the 3.2 percent it had previously forecast. |
| There was one positive sign for global growth on Monday. A separate survey by Markit and HSBC, focusing on China’s manufacturing sector, suggested that growth in China was rebounding after months of weakening. That index rose to 50.8 in June, from 49.4 a month ago. | There was one positive sign for global growth on Monday. A separate survey by Markit and HSBC, focusing on China’s manufacturing sector, suggested that growth in China was rebounding after months of weakening. That index rose to 50.8 in June, from 49.4 a month ago. |
| Mr. Brzeski said he saw no immediate solution to Europe’s fundamental problem: insufficient demand. Governments appear “to be loosening the austerity screws a bit,” he said, possibly providing a small stimulus. | Mr. Brzeski said he saw no immediate solution to Europe’s fundamental problem: insufficient demand. Governments appear “to be loosening the austerity screws a bit,” he said, possibly providing a small stimulus. |
| But consumers remain weighed down by debt and fearful of spending because of the precarious job market. | But consumers remain weighed down by debt and fearful of spending because of the precarious job market. |
| Consumption “will pick up a little as the labor market starts to slowly improve,” Mr. Brzeski said, “but unemployment rates are simply too high for consumption to bounce back substantially.” | Consumption “will pick up a little as the labor market starts to slowly improve,” Mr. Brzeski said, “but unemployment rates are simply too high for consumption to bounce back substantially.” |
| The best hopes, he said, are in government spending, exports and possibly investment, as well as “a huge portion of keeping your fingers crossed.” | The best hopes, he said, are in government spending, exports and possibly investment, as well as “a huge portion of keeping your fingers crossed.” |