Thu, Oct 04, 2012 - Page 15 News List

Euro-area manufacturing, services output contracts — for eighth month


Euro-area services and manufacturing output contracted for an eighth month last month, adding to signs the economy has slipped back into a recession that may extend through the end of the year.

A composite index based on a survey of purchasing managers in both industries fell to 46.1 from 46.3 in August, London-based Markit Economics said yesterday. That’s above an initial estimate of 45.9 published on Sept. 20. A reading below 50 indicates contraction.

Joachim Fels, chief economist at Morgan Stanley, said the euro area’s economic gloom would deepen.

“First of all, there’s still fiscal tightening going on,” Fels told Tom Keene and Sara Eisen on Bloomberg Television’s Surveillance on Monday. “We have a global economy that has entered what I call the twilight zone — that’s the fuzzy area between sustained expansion and renewed recession. The global data are still weakening. There are domestic and global reasons why the economy in Europe is weakening further.”

An indicator of services output slipped to 46.1 from 47.2, yesterday’s report showed. A gauge of euro-area manufacturing advanced to 46.1 from 45.1 the previous month.

Euro-area governments may find it more difficult to plug their budget gaps with at least five euro nations already in recession and the fiscal crisis spreading from the periphery to core countries. In Germany, Europe’s largest economy, business confidence unexpectedly declined to the lowest in more than two-and-a-half years last month. French consumers also grew more pessimistic last month.

Meanwhile, China’s non-manufacturing industries expanded at the weakest pace last month since at least March last year as officials struggle to reverse a slowdown in the world’s second-biggest economy.

The purchasing managers’ index fell to 53.7 from 56.3 in August, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing yesterday. Readings above 50 indicate expansion.

The PMI number was lower than any previous reading in data compiled by Bloomberg News and starting in March last year.

Lu Ting (陸挺), a Hong Kong-based economist with Bank of America Corp, previously described the gauge as low-quality, subject to seasonal distortions and with much less “predictive power” than equivalent surveys for manufacturing.

The government has accelerated approvals for investment projects, lowered interest rates and boosted tax support for exporters in response to the slowdown. At the same time, authorities have refrained from easing monetary policy since rate cuts in June and July and a May reduction in banks’ reserve requirements.

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