Eurozone growth indictator shows new slump in momentum

Private sector activity in the eurozone saw a new drop in momentum in July as recovery slowed in key economies and deterioration quickened in Greece and Spain, a key growth indicator showed yesterday.

The data showed output growth slowing in Germany, France, the Netherlands and Austria, with Italy moving slightly higher but “only to a level broadly consistent with stagnation”, according to the Purchasing Managers Index (PMI) leading indicator, compiled by research firm Markit.

The “readings confirm a further drift towards stagnation for the eurozone manufacturing sector, a marked turnaround from the surging growth seen at the beginning of the year”, said Markit senior economist Rob Dobson.

After record highs six months ago, France registered a 24-month low and Germany a 21-month low.

The PMI, a survey of 4,500 companies in service and manufacturing in the 17-nation eurozone, fell to 50.4 points, below 52 points in June.

Despite the fall, the index remains above the 50-point mark indicating growth.

The eurozone posted growth of 0.8 per cent in the first quarter, picking up steam after a mere 0.3 per cent in the last three months of 2010.

Second quarter estimates are due August 16.

Economists say the single currency area, scrambling to contain a debt crisis in Greece, will struggle to retain growth.

“The breadth of the deterioration in order inflows is striking, with declines in new business seen not only in the periphery but also in the now rapidly-cooling core nations of France and Germany,” Mr Dobson said.

The “brighter news” was in employment, which continues to rise, albeit slowly, and in the slowdown of inflation, he added.

But he warned: “The ability of firms to continue to raise employment and selling prices will be called into question, however, if the trend in demand fails to recover in the near-term horizon.”

The unemployment rate in the eurozone in fact remained steady at 9.9 per cent for the fourth month running in June, official European Union data showed yesterday.

An estimated 15.6 million men and women were unemployed in the 17-nation single currency area in May, an increase of 18,000 from May, according to Eurostat data agency.

The eurozone’s seasonally adjusted jobless rate dropped under the 10 per cent mark in March and has settled at 9.9 per cent since. A year earlier it stood at 10.2 per cent.

The unemployment rate of the wider 27-nation European Union, which includes Britain and Poland, was also unchanged at 9.4 per cent in June, compared with 9.7 per cent a year earlier.

About 22.473 million people were unemployed in the EU in June, 38,000 fewer than in May.

Spain still had the highest unemployment rate in the eurozone in May at 21 per cent, while the lowest was recorded in Austria at four per cent.

Over a year, unemployment fell in 19 EU nations, increased in seven and remained stable in Luxembourg.

Youth unemployment stood at 20.3 per cent in the euro area and 20.5 per cent in the EU 27, ranging from the lowest rate in the Netherlands, at 7.1 per cent, to the highest rate of 45.7 per cent, recorded in Spain.