The Nation Newspaper

Tag: Eurozone

  • Eurozone economic growth speeds up

    Eurozone economic growth speeds up

    Eurozone business activity rose at its fastest pace in four years in June, boosted by higher spending by consumers and businesses, a survey has indicated.

    The final Markit composite eurozone Purchasing Manages’ Index (PMI), which combines manufacturing and services activity, rose to 54.2, its highest reading since May 2011. Any reading above 50 indicates growth, while below 50 points to contraction.

    Markit said the data pointed to second-quarter economic growth of 0.4%. It comes despite concerns over the possibility of a messy Greek exit from the euro.

    Speculation that Athens would miss a €1.6bn repayment to the International Monetary Fund (IMF)  held back manufacturing activity in the month, Markit said.

    But the European Central Bank’s (ECB) massive €1 trillion bond-buying programme announced in March was beginning to help the service sector, with activity running at its fastest rate since mid-2011.

    Markit said the ECB stimulus programme – combined with low inflation – had boosted spending and investment across the eurozone, as consumers and businesses splurged their cash in an attempt to beat expected price rises.

    “Despite the escalation of the Greek crisis in the second half of the month, the final PMI for June came in slightly above the ‘flash’ estimate, suggesting the turmoil has so far had little discernible impact on the real economy,” said Markit’s chief economist, Chris Williamson.

    But he noted companies continued to cut prices to help boost sales, as they have since early 2012.

    The composite price index was 49.4, below May’s reading of 49.5, suggesting prices are still falling and that the ECB’s battle with low inflation across the currency bloc has some way to go yet, despite official estimates suggesting a slight increase in inflation.

    Price discounting helped drive up the PMI covering the service industry, which makes up the bulk of the eurozone economy. It rose to 54.4 from May’s 53.8.

  • Eurozone not viable, says Neil Woodford

    The eurozone is not viable in  its current form, one of the  United Kingdom’s (UK’s) most successful fund managers has warned.

    Neil Woodford, who set up his own investment firm last year, said the concept was “fundamentally flawed” and he expected the “stresses and strains” in the area to continue to increase.

    “In a very simple sense pretending that Greece was Germany is a fundamental error,” he told BBC World News.

    He also said uncertainty over Britain’s EU membership could hit the UK economy.

    The Conservative Party has promised to hold an in-out referendum on the UK’s continuing membership of the EU if it wins this year’s general election.

    The referendum would be held only after David Cameron, if he is still prime minister after May, had attempted to renegotiate the terms of the UK’s membership of the EU.

    “The likelihood of a referendum, I think, will put a brake on external investment, international investment in the UK… it will create uncertainty,” Mr Woodford told the BBC’s Hardtalk programme.

    Mr Woodford is considered in the industry as one of the country’s best-performing fund managers.

    He gained fame during his 25-year career at Invesco Perpetual, for taking a long term view on investments.

    One of the best-known examples of his strategy was refusing to invest in the dotcom boom of the late 1990s and early 2000s.

    Neil Woodford made his reputation with Invesco Perpetual, but left last year to launch his own investment fund: Woodford Investment Management.

  • Eurozone manufacturing growth remains ‘meagre’

    Eurozone manufacturing growth remained “meagre” in January as factories slashed prices at the fastest rate since mid-2013, a survey has said.

    The latest Markit/CIPS eurozone Purchasing Managers’ Index (PMI) rose to 51 in January from 50.6 in December.

    Although this was only just above the 50 mark, which indicates growth, it was the strongest figure for six months.

    Eurozone manufacturers are facing a duel problem of weak domestic demand and export performance, Markit said.

    Official data showed deflation in the eurozone deepened in January with prices falling 0.6 per cent in the month compared with a year earlier.

    Markit’s survey found the falling price of oil drove average manufacturing costs down at the fastest pace for five-and-a-half years.

    Lower cost pressures were partly reflected in average selling prices. Output charges fell for the fifth month in a row and registered the biggest fall for more than a year and a half.

    The survey was carried out before the European Central Bank (ECB) announced its €1.1trillion (£820billion) bond buying programme, which Markit’s chief economist Chris Williamson, said should boost business and consumer confidence in the eurozone and weaken the euro further, helping to boost exports.

    The single currency has already fallen more than six per cent versus the US dollar since the start of the year.

    Mr Williamson said: “Eurozone manufacturing showed signs of pulling out of the doldrums at the start of the year, but the rate of expansion remained disappointingly meagre, vindicating the ECB’s decision to take drastic action to revive the economy.

    “The currency’s fall should benefit exporting manufacturers in particular over coming months.” Lower oil prices will also help reduce manufacturers’ costs, with reduced fuel costs also freeing up more consumer income to spend on goods.”

    Markit said improvements in business conditions were seen in Germany, Spain, the Netherlands and Ireland during January.

    But this was offset by manufacturing downturns in France, Italy, Austria and Greece.

    The rates of contraction in France and Italy stabilised, but Austria and Greece registered bigger downturns.

    Italy saw a slight rise in output for the first time since September 2014, and the rate of decline in France was the weakest in the eight months.

    But “the continuing slump in new orders to both nations may act as an ongoing headwind in coming months”, Markit said.

    Data from Germany, Europe’s biggest economy, showed factory growth there was also slower than previously thought.

  • OECD sees global economy held back by slow eurozone

    OECD sees global economy held back by slow eurozone

    Conflict in the Ukraine is among the factors holding back global growth,

    A slow recovery among nations using the euro is holding back the global economy, the Organisation for Economic Co-operation and Development (OECD) has said.

    The market economy group downgraded its growth forecast for most big economies.

    Conflicts in Ukraine and the Middle East and the referendum on an independent Scotland are areas of risk and uncertainty, it said.

    Its 2014 estimate is a 0.8per cent increase in the eurozone economy for 2014, compared with a forecast of 1.2 per cent made in May.

    The UK’s forecast was cut by 0.1 percentage points to 3.1 per cent.

    US economic expansion for the year was cut to 2.1per cent from 2.6per cent. Japan’s forecast was cut to 0.9per cent from 1.2per cent.

    The OECD did not provide an update to its forecast for global growth for 2014, which it forecast at 3.4per cent in May.

    “Continued slow growth in the euro area is the most worrying feature of the projections,” the OECD said.

    Among countries which are not OECD members, China’s forecast was unchanged at 7.4per cent. The OECD said China “has so far managed to achieve an orderly growth slowdown to more sustainable rates”.

    India was the only economy to be judged by the organisation as likely to grow quicker, with its forecast upgraded to 5.7per cent from 4.9per cent after voting in a new government that said it would pursue growth-oriented reforms and progress in containing inflation.

  • Eurozone manufacturing at 13-month low

    Manufacturing growth in the eurozone slowed to a 13-month low last month, according to a closely-watched survey.

    The final Markit’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) dipped to 50.7 last month, down from 51.8 in July. A figure above 50 indicates expansion.

    New orders dwindled and factories suffered amid rising tensions between the EU and Russia over Ukraine.

    The figures came ahead of the European Central Bank (ECB) meeting last week.

    Markets will be looking for a clear plan from the bank to deal with a stalled eurozone recovery, as well as the threat of deflation with inflation standing at just 0.3 per cent.

    There is speculation that ECB boss Mario Draghi could offer further indications later this week that he is considering a quantitative easing scheme for the eurozone, similar to those taken by the UK and US during the financial crisis.

    “Although some growth is better than no growth at all, the braking effect of rising economic and geopolitical uncertainties on manufacturers is becoming more visible,” said Rob Dobson, senior economist at Markit.

    The factory PMI for Germany, Russia’s biggest trade partner in the EU, fell to an 11-month low of 51.4.

    Meanwhile, in the bloc’s second-largest economy, France, the PMI fell to 46.9.

    “France remains a real concern, as does Italy’s descent from solid expansion to stagnation. Signs that growth impetus waned in the key industrial engine of Germany, and in Spain and the Netherlands too, is also less than reassuring,” Mr Dobson said.

    “The slowdown in industry is likely to add further fuel to the fire for analysts expecting additional monetary or fiscal stimulus to be implemented.”

    One positive note was from the Republic of Ireland, which saw its PMI grow to 57.3, its highest level since the end of 1999.

    Howard Archer, chief economist at IHS Global Insight, said: “The best that can be said for the August eurozone manufacturing purchasing managers’ survey is that it indicates that the sector is still growing.”

    He added: “Eurozone manufacturers are clearly finding life very difficult at the moment as current heightened geopolitical tensions – particularly related to Russia/Ukraine – add uncertainty to still challenging conditions in many countries.

    “This heightened uncertainty has clearly hit business – especially, and consumer confidence, and it is likely causing some orders to be delayed or even cancelled, particularly big-ticket orders.”

    He said it was looking “ever more likely” that the ECB would ultimately have to undertake some form of QE, “although we suspect that it will be limited”.

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