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Eurozone firms see weak growth
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EUROZONE businesses are ending 2014 in slightly better shape than thought but growth remains weak and firms are still cutting prices to encourage trade, surveys showed yesterday.
Markit’s Composite Flash Purchasing Managers’ Index, based on surveys of thousands of companies and seen as a good growth indicator, rose to 51.7 from a 16-month low of 51.1.
That beat the forecast in a Reuters poll for a rise to 51.5 but was the second-lowest reading in over a year.
“Overall, it’s a very disappointing picture of a weak euro area. It’s not any cause for celebration. If it is stabilizing, it is at a very weak rate of growth,” said Chris Williamson, chief economist at Markit.
December marks the 18th month the index has been above the 50 level that separates growth from contraction. But the expansion has come at a cost: an output price reading of 48.0 showed firms cut prices for the 33rd month.
Inflation in the bloc cooled to a five-year low of just 0.3 percent last month, well within the European Central Bank’s “danger zone”, adding to hopes for more policy easing.
Weak growth and deepening concern that plunging oil prices may send the eurozone into a deflationary spiral will push the ECB to buy sovereign debt early next year, a Reuters poll found last week.
A PMI covering the service industry increased to 51.9 from 51.1, exceeding expectations for 51.5, while the factory PMI posted a similar jump to 50.8. The Reuters poll had forecast 50.5.
An index measuring factory output that feeds into the composite PMI held steady at 51.2.
Taken as a whole, Williamson said the PMIs pointed to fourth-quarter GDP growth of 0.1 percent, below the 0.2 percent predicted in a Reuters poll last week.
As an earlier composite PMI covering Germany, Europe’s biggest economy, showed weaker growth and one for France highlighted a continued decline, the eurozone survey suggested there was a renewed upturn in the bloc’s smaller periphery countries.
“The periphery is seeing faster growth but you are in danger that if the core remains weak, that will spread to the periphery and everything will come down again,” Williamson said.
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