Thu, Jun 06, 2013 - Page 15 News List

Eurozone remains stuck in ‘longest’ recession: report

AFP and Reuters, BRUSSELS and LONDON

Eurozone business activity remained stuck in negative territory last month, but showed signs of stabilizing, a widely watched survey showed yesterday.

The Markit Eurozone Composite Purchasing Managers Index (PMI) was unchanged from the initial reading at 47.7 points, hitting a three-month high and well up on April’s 46.9 points, but still below the boom-bust threshold of 50 points.

On the positive side, Germany, Europe’s powerhouse economy, edged up to 50.2, a two-month high, while struggling Spain hit 47.2, its best performance in 23 months.

France was still deep in trouble at 44.6, although this was a five-month high, while Italy was unchanged at 46.6.

Markit chief economist Chris Williamson said the report confirmed “that the eurozone remains gripped in the longest recession” since the introduction of the euro.

The economy is likely to have contracted 0.2 percent in the second quarter, making for seventh consecutive run of negative figures, Williamson said.

While the downturn may have eased, the “reality is that the region lacks any growth drivers, making it difficult to believe that anything better than a mere stabilization of economic activity remains unlikely for the foreseeable future,” he said.

Meanwhile, Britain’s service sector grew much faster than expected last month with new business increasing at its fastest rate in over three years, a survey showed yesterday, showing that the economy is picking up speed.

The PMI for services, produced by Markit and the Chartered Institute of Purchasing & Supply, rose to 54.9 from 52.9 in April.

That was the strongest reading since March last year and easily beat the top forecast of 53.6 in a Reuters poll of 30 economists. The median forecast was 53.

The figure was helped by better weather and was boosted by a rise in new orders which hit their highest level since February 2010.

“The UK economy has moved up a gear with all cylinders now firing,” Williamson said.

Added to positive manufacturing and construction PMI surveys this week, the figures suggested economic growth was gaining speed in the second quarter and could reach 0.5 percent if this month sees a sustained expansion, he added.

Britain’s economy grew 0.3 percent in the first three months of this year, avoiding a return to recession.

The Bank of England held its June policy meeting yesterday and today, the last before Mervyn King is replaced by Mark Carney as governor on July 1.

“New governor Mark Carney will have the benefit of taking the reins of an economy that is already showing signs of acquiring ‘escape velocity’ from the doldrums it has been wallowing in for much of the last two years,” Williamson said.

“The increasingly buoyant picture and improved outlook painted by the PMIs effectively kills off any chance of the Bank of England’s Monetary Policy Committee voting for more stimulus such as asset purchases for the foreseeable future,” he added.

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