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Eurozone Economy Expanding Slightly Despite Weakness in Germany and France Over All, Eurozone Economy Is Still Growing, Survey Finds
(about 17 hours later)
PARIS — The eurozone economy is still expanding, private-sector data showed on Tuesday, even as France and Germany registered weakness.PARIS — The eurozone economy is still expanding, private-sector data showed on Tuesday, even as France and Germany registered weakness.
Markit Economics, a data analysis company in London, surveyed purchasing managers across the 18-nation currency bloc this month about their business prospects, and a composite index based on the study rose to 51.7 from 51.1 in November. A reading below 50 indicates a contraction, while a number above that level suggests expansion.Markit Economics, a data analysis company in London, surveyed purchasing managers across the 18-nation currency bloc this month about their business prospects, and a composite index based on the study rose to 51.7 from 51.1 in November. A reading below 50 indicates a contraction, while a number above that level suggests expansion.
The survey pointed to weakness at the so-called core of the eurozone, with German companies reporting the smallest increase in business activity since June 2013, and activity declining in France for an eighth consecutive month. The purchasing managers’ survey does not correlate precisely with gross domestic product, but it does provide a widely watched real-time indicator of economic activity in the region.The survey pointed to weakness at the so-called core of the eurozone, with German companies reporting the smallest increase in business activity since June 2013, and activity declining in France for an eighth consecutive month. The purchasing managers’ survey does not correlate precisely with gross domestic product, but it does provide a widely watched real-time indicator of economic activity in the region.
A separate survey on investor and analyst confidence from the ZEW Center for European Economic Research nonetheless gave grounds for optimism about Germany. The ZEW sentiment indicator, based on the outlook for the next six months, rose to 34.9 points in December from 11.5 in November.A separate survey on investor and analyst confidence from the ZEW Center for European Economic Research nonetheless gave grounds for optimism about Germany. The ZEW sentiment indicator, based on the outlook for the next six months, rose to 34.9 points in December from 11.5 in November.
Clemens Fuest, president of the institute, said the data showed that confidence in Germany seemed to be returning as a result of “favorable economic conditions such as the weak euro and the low crude oil price.”Clemens Fuest, president of the institute, said the data showed that confidence in Germany seemed to be returning as a result of “favorable economic conditions such as the weak euro and the low crude oil price.”
Michel Martinez, chief eurozone economist at Société Générale, said the data was consistent with “sluggish” fourth-quarter growth in the eurozone’s gross domestic product G.D.P. of an estimated 0.2 percent, the same as in the third quarter. On an annualized basis, the eurozone’s 0.6 percent expansion in the third quarter was far behind the United States economy’s gain of 3.9 percent.Michel Martinez, chief eurozone economist at Société Générale, said the data was consistent with “sluggish” fourth-quarter growth in the eurozone’s gross domestic product G.D.P. of an estimated 0.2 percent, the same as in the third quarter. On an annualized basis, the eurozone’s 0.6 percent expansion in the third quarter was far behind the United States economy’s gain of 3.9 percent.
The latest purchasing managers’ report does nothing to change the picture of an economy for which there are no obvious sources of new demand. Austerity policies have curtailed government outlays, businesses are unwilling to invest amid uncertain prospects, and consumer spending has been held in check by an average jobless rate in the eurozone of 11.5 percent.The latest purchasing managers’ report does nothing to change the picture of an economy for which there are no obvious sources of new demand. Austerity policies have curtailed government outlays, businesses are unwilling to invest amid uncertain prospects, and consumer spending has been held in check by an average jobless rate in the eurozone of 11.5 percent.
“To have growth substantially above this level will require a bigger improvement in confidence,” Mr. Martinez said, adding that this was unlikely in the near term. In 2015, policy uncertainty, concerns about elections in Greece and Spain, and problems in emerging markets are all likely to weigh on growth, he said.“To have growth substantially above this level will require a bigger improvement in confidence,” Mr. Martinez said, adding that this was unlikely in the near term. In 2015, policy uncertainty, concerns about elections in Greece and Spain, and problems in emerging markets are all likely to weigh on growth, he said.
“Austerity fatigue is setting in,” he said, “but governments have no room to maneuver” on fiscal spending. The best that can be hoped for, he added, is that the speed of fiscal consolidation eases further, as “fiscal stimulus is not on the table.”“Austerity fatigue is setting in,” he said, “but governments have no room to maneuver” on fiscal spending. The best that can be hoped for, he added, is that the speed of fiscal consolidation eases further, as “fiscal stimulus is not on the table.”
Poor demand is exacerbating the risk that ultralow consumer prices will tilt into outright deflation, a policy conundrum for the European Central Bank. The bank’s president, Mario Draghi, and his colleagues on the governing council have already cut interest rates to rock bottom, and the only major tool left at their disposal would appear to be so-called quantitative easing, or bond-buying on a large scale.Poor demand is exacerbating the risk that ultralow consumer prices will tilt into outright deflation, a policy conundrum for the European Central Bank. The bank’s president, Mario Draghi, and his colleagues on the governing council have already cut interest rates to rock bottom, and the only major tool left at their disposal would appear to be so-called quantitative easing, or bond-buying on a large scale.
The sole glimmer of hope at the moment might be the sharp decline in oil prices, which translates imperfectly into increased consumer spending power. But lower oil prices also mean more downward pressure on prices.The sole glimmer of hope at the moment might be the sharp decline in oil prices, which translates imperfectly into increased consumer spending power. But lower oil prices also mean more downward pressure on prices.
Fitch Ratings last week cut its credit rating for France to AA from AA+, warning that “the weak outlook for the French economy impairs the prospects for fiscal consolidation and stabilizing the public debt ratio.” That has had little effect on French borrowing costs, which are hovering near record lows.Fitch Ratings last week cut its credit rating for France to AA from AA+, warning that “the weak outlook for the French economy impairs the prospects for fiscal consolidation and stabilizing the public debt ratio.” That has had little effect on French borrowing costs, which are hovering near record lows.
The Euro Stoxx 50 index, a barometer of eurozone blue chips, was little changed after the report, with the euro gaining 0.5 percent against the dollar to $1.2495.The Euro Stoxx 50 index, a barometer of eurozone blue chips, was little changed after the report, with the euro gaining 0.5 percent against the dollar to $1.2495.